Let’s Chat Dairy – 3 May 2024

Let’s Chat Dairy is a weekly podcast, hosted by HighGround Dairy’s top analysts. At the end of every week, they sit down to recap the week in dairy markets and summarize recent reports and relevant news. The podcast can be found here on our dashboard, or wherever you listen to your podcasts. Subscribe so that you never miss an episode!

Listen on Spotify | Listen on Apple Podcasts | Listen on Amazon Music

HighGround Dairy’s Navigating HPAI Dairy Market Resource Center offers insights and updates from trusted sources on the ongoing Avian Flu outbreak affecting dairy cattle in the US. Stay informed with real-time updates as we continue to provide crucial information and analysis to the dairy industry amidst this challenging situation. Click here to read the latest now.

Early Bird Registration ENDS IN 1 WEEK for HighGround Dairy’s third annual Global Dairy Outlook Conference this June in Chicago! Space is limited at the historic Union League Club so be sure to register soon to secure your spot! Click here for more details, including the agenda, expert speakers, and more.

Transcript:

(0:14) Alyssa Badger:
Hello everyone, and thank you so much for tuning in to Let’s Chat Dairy, your favorite weekly market podcast powered by HighGround Dairy. Today’s Friday, May 3rd, and you’re hearing from Alyssa Badger and Cara Murphy.

What a whirlwind of a week. We are so happy to have seen and spoken with so many of you that attended the ADPI conference here in Chicago. It’s always a pleasure to see how the industry is growing and changing over time. But more importantly, we finally got some sunshine at the ADPI conference, so it was great to sit out on a patio and chat with you guys in the sunshine for the first time in a while.

And in case you missed it with everything going on, we also announced another speaker for HighGround’s 2024 Global Dairy Outlook Conference, which will be held in Chicago this summer, June 18th through the 20th. Preston De Jong, Chief Operating Officer at Horizon Dairy and Four Leaf Dairy, will be joining our Producer Panel to discuss the challenges and innovations dairy farmers face today. You won’t want to miss this conference, and early bird registration will end May 10th, which is next Friday. To get that deal on tickets, head over to highgrounddairy.com/conference to register today.

With that, let’s hop into the markets, starting with the CME Spot Market Recap, Cara.

(1:36) Cara Murphy:
So the cheese market continues to climb with blocks up to $1.79 today with two trades in total, while barrel cheddar jumped $0.825 on Tuesday and closed the week at $1.88 with nine trades. Dry whey is back up close to the $0.40 per pound mark, closing today at $0.395 with 11 trades, and nonfat dry milk still hanging in the same tight range today at $1.13 with 12 trades. That leaves butter. Oh boy, butter prices soared this week to $3.075 by today, the highest price since November 3rd, 2023, and saw 23 trades on Thursday and another 13 today, with the highest at $3.095. Wow.

We will get March dairy products production report from the USDA on Monday, which could help to cool this market, but then again, the elevated prices throughout April has not aligned with fundamental data, suggesting there is something else at play here. That analysis and High Ground’s opinion on the matter will be released the following day, Tuesday, on the HighGround Dairy website, so if you are a subscriber, you can locate it there, and if you are not, you can request a free trial for access.

(2:43) Alyssa:
Thanks, Cara.

We continue to follow the story of high pathogenic avian influenza impacting these dairy markets, with updates available at the Dairy Market Resource Center on our website, but, Cara, did anything new pop up this past week?

(2:59) Cara:
Yes. The USDA confirmed the detection of HPAI in a Colorado dairy herd, bringing that to a total of nine states with infected herds. However, in good news, the USDA confirmed that testing of retail ground beef for the virus came back negative, reaffirming that the meat supply is safe, and further testing of pasteurized dairy products, who initially showed signs of residual fragments of the virus, have came back negative as well. Pasteurization does fully inoculate H5N1 in milk and dairy products, reaffirming that pasteurized dairy products are safe as well. This is not the case for raw milk or raw dairy products, so again, don’t drink raw milk or raw milk dairy products. Don’t do it. It’s not good.

Now, let’s talk U.S. trade. Total dairy products exports declined year over year in March, totaling 239.62 metric tons, the lowest value for the month since 2020. Still, not all was lost. Total cheese exports marked a new all-time high, besting the prior high watermark by 5,917 metric tons, or 13 million pounds, set in June 2022. Cheddar, fresh, and grated cheese shipments were up, along with exports to Mexico, South Korea, Japan, and Canada. Inexpensive cheese beginning in the late 2023 likely lifted this category.

Also, whey protein concentrate greater than 80% shipments marked a new record high, while dry whey, butter, and nonfat dry milk shipments struggled.

What else has been happening around the globe, Alyssa?

(4:32) Alyssa:
Well, across the pond, the EU-27 + UK Milk Production in February fell by 0.2% on a 30-day adjusted basis, and excluding Belgium, who has yet to publish results for the month. German milk flows were negative, while France output actually rose. Although, weekly milk collections data that we continue to watch indicate that this dynamic may flip as early as April. Butterfat production continues to lag the prior year, with all of the top 10 butter producing nations recording lower output in February, adding to concerns over availability into autumn and pushing prices higher.

In contrast, only five countries reported lower cheese production than prior year from the block. Weekly European energy exchange price indices have held relatively stable within a 40 euro per metric ton range since the start of March when we’re talking cheese, as healthy demand keeps production in check.

(5:31) In Oceania, ahead of the global dairy trade event this upcoming Tuesday, Fonterra announced no adjustments to its offer volume forecast for the coming 12 months. Traders have minimized their expectations over the longer-than-normal break between physical auction results, with negative outcomes for all of the four key commodities priced into the Singapore exchange dairy derivatives market. SGX whole milk powder futures have traded the entire forward curve back below the $3,150 per metric ton mark over the last week. There is little to suggest that demand has increased across any of the key whole milk powder markets, particularly from China, with reports indicating that inventories in the country remain more than adequate.

Skim milk powder expectations carry the same tune, with a continuation of waning supply versus weak demand as the limiting factor. And lastly, both butter and AMF futures remain under-traded, with the AMF physical to financial mismatch providing a phenomenally negative price expectation. Overall, a negative auction looks likely, but the global milk fat markets will be watching closely, especially considering where the U.S. butter market continues to trade.

(6:49) We are also about to send off our Asia Trade Flow Analysis, and there were definitely some interesting data points in there. Japan’s March skim milk powder imports jumped to the highest in four years, which was the fourth month of year-on-year growth following 13 months of losses. New Zealand was the number one supplier, but Australia also took on stronger market share with volumes growing from the U.S. as well.

But the demand news wasn’t all that positive across every Asia region, because even with that extra day in February, Indonesia reported steep dairy import losses, especially from New Zealand and primarily in the form of whole milk powder. Indonesia’s imports from the U.S. were also pretty weak, especially in the form of skim milk powder and lactose. In the Philippines, unlike the December data, January turned to negative territory once again, primarily dragged lower by the continuation of weak skim milk powder from the U.S. You can of course find all of this information in greater detail on our comprehensive reports that are available to our subscribers on the HighGround Dairy website, and if you’re not already a subscriber, you can request a free trial for access today.

Looking for something even more? Register for HighGround’s 2024 Global Dairy Outlook Conference, where you’ll hear from our team on the market expectations on a global scale, as well as a host of amazing speakers covering dairy production, weather, agricultural lending trends, and Chinese economics, policy, and dairy demand. Early bird registration, as a reminder, ends on May 10th, so get your tickets today. With that, thank you for joining us on Let’s Chat Dairy, and have a great weekend and a fantastic spring. Cheers!