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!
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Transcript:
(0:12) Cara Murphy:
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 is Friday, July 26, and you’re hearing from Cara Murphy and Stu Davison, our in-house Kiwi to cover the international side of things. Alyssa and Betty are both out on some well-deserved time off, so here we are. Nonetheless, the world keeps turning, the markets keep moving, and we’re going to talk about them. This week we had June 2024 US Milk Production Report, June US Cold Storage Report, June Chinese Imports, and June New Zealand Milk Production and Exports. Wow, that’s a lot to get through.
(0:50)
So let’s hop to it and begin with this week’s CME Spot market recap. Dry Whey is the talk of the town this week as it closed at $0.5700 per pound today, the highest price since May 9th, 2022, with just one trade on the books. Cheese, on the other hand, climbed in the early part of the week before slipped back a bit at the end. Blocks settled today at $1.9300 per pound with 15 trades in total, while barrels marked $1.9700 with 10 trades on the week. In Class IV, butter is a bit range bound, coming back a bit from last Friday to close the end of the week at $3.09 with 17 trades, while nonfat dry milk has been on the move up to $1.2350 on Wednesday and closing today at $1.2325 with 26 trades.
(1:35)
Now, keeping it in the land of the free and home of the state fair fried cheese curds—my personal favorite–we’ll start with the June 2024 US Milk Production Report, which dropped 1% versus 2023. This marked the 12th consecutive month of year-on-year losses, making it bullish to expectations. The steep decline was driven by a smaller herd size and lower milk per cow than the prior year. Hot temperatures out in California weighed on milk flows. And while farmers are recovering, Highly Pathogenic Avian Influenza (HPAI) continues to plague some areas. But the big story of the report was revisions. The USDA often adjusts numbers at the end of the quarter, and we saw an update to cow numbers and milk per cow from February onward. February’s herd size increased by 1,000 head, March lost 2,000 head and April’s tally was slashed by a whopping 10,000 head, a rather sizable counter-seasonal decline. However, May saw the most significant revision at 17,000 fewer cows were counted.
If you’re a subscriber and you’d like to take a dive into the rest of this report where our lovely Betty Burning discusses milk output on a regional level, head on over to highgrounddairy.com for the full analysis. And if you’re not a subscriber, head on over to the website to request a free trial today.
(2:51)
All right, let’s get into Cold Storage Report now, shall we? Safe to say this report was a bit of a snooze. Butter was neutral to expectations. Stocks climbed year on year for the fifth consecutive month and sit at the highest June since 2021. Inventory slipped from May to June down 6.2 million pounds, not really out of the ordinary for this time of year. Butter exports have been rather small throughout 2024. Meanwhile, domestic consumption has been quite healthy. Domestic utilization was up 18.2% year on year in May as the Americans’ love for butter contributed to lower stocks. That said, cream is tightening and lower milk flows in the West combined with high summer temperatures is likely to keep prices above three dollars per pound through October. But in good news, ample product in storage indicates major price spikes are unlikely.
(3:40)
Lastly, cheese stocks were also neutral to expectations. Total cheese inventories moved lower seasonally from May down 11.2 million pounds. However, the numbers are not average and June stock levels are the lowest mark for June since 2020 and the smallest since November 2021. Natural American cheese is to blame as stocks hit their lowest mark since December 2021, weighing in at 805 million pounds, down 11 million pounds from May. Lower output this year resulted in less cheese in storage. Who would have thought? For other than American cheese, stocks recorded 618 million pounds. Mozzarella has been the cheese of the year and as such, manufacturers have pumped out more. Even so, excess has not been made. The takeaway here is that without the spring build, cheese inventories are headed into high demand season and look weak. Strong exports and muted output earlier in the year are the root of the cause. But international demand has waned as prices rose. So perhaps inventories will be able to recover. However, milk is seasonally shrinking. So then again, perhaps not. We’ll have to see. All right.
With that, Stu, let’s take a voyage on the international train around the world.
(4:50) Stu Davison:
Righto, well, let’s look across the Pacific. June 2024 Chinese Dairy Imports were lackluster, to say the least. The story remains the same with milk powder and fluid milk imports still under pressure, mostly due to strong domestic supplies and less-than-impressive consumption levels. While butter imports did pop to the highest monthly volume since March 2023, Chinese dairy farmers are under significant pressure, with domestic milk prices falling to all-time lows reported this July. The oversupply of milk and limited level of consumption has the Chinese government looking to boost domestic demand and dip into the export market to alleviate some financial pressure. Looking ahead, the major concern here is for a slight overcorrection, leading to a significant reduction in milk supply. If this were to occur, import volumes, particularly for Finnish products like cheese and butter, could likely tick higher.
(5:41)
Now, in the land down under, and a bit to the right, aka the land of the long white cloud, Aotearoa, it was a sluggish start to the 2024-2025 New Zealand dairy season, with June’s Milk Production lagging 2.2% from the year prior. Volume collections receded 1.1%, so a flip of the trend we saw in this previous season. Although this was lighter than expected, the month of June is the smallest production month of the calendar, and as such has very limited impact on the full season to come. We are keeping a close eye on the New Zealand weather and farmer sentiment for the coming months ahead, which will inform us of what spring milk production looks like.
(6:19)
Last but not least, on the export side of things, total New Zealand Exports in June shrunk 7.2% from last year, with the bulk of this decline attributable to the whole milk powder and milk fat classes. Whole milk powder exports dropped to the top two markets, namely China and Algeria, down 18.8% and 35%, respectively, year over year. Milk fat exports of both butter and AMF dipped as well, with June butter shipments totaling the smallest volume since 2020. Cheese sailings dropped on lower volume to China, but increased to South Korea and Japan, very key cheese markets. Notably, infant formula shipments surged with June’s volume, pushing year-to-date change up 9.4% from 2023. Impressive. Back to you, Cara.
(7:05) Cara:
Thanks. That was great. Well, that’s all, folks. It’s fair time, so we’re wishing the best of luck to all those FFA and 4H-ers with their projects, both big and small. Thanks again for tuning into this week’s Let’s Chat Dairy. Be sure to subscribe and join us next week for another discussion on dairy fundamentals. If you have any questions or topics you’d like us to cover, feel free to reach out to us via email at info@highgrounddairy.com. Cheers.
Stu:
Cheers.
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The post Let’s Chat Dairy – 26 July 2024 appeared first on HighGround Dairy.