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:
(0:14) Alyssa Badger:
Hello everyone, happy Friday. Thank you so much for tuning in to Let’s Chat Dairy, your favorite weekly market podcast powered by HighGround Dairy. Today’s August 30th and you’re hearing from Alyssa Badger and Cara Murphy. It’s been a quiet week for reports, but certainly not for the markets. We know most of you are on your way to enjoy a relaxing Labor Day weekend here in the US, so we’ll keep this episode short, sweet, and to the point. And with that, let’s get rolling with the CME Spot Market Recap.
(0:45) Cara Murphy:
All right, what a whirlwind week for cheese. Block cheddar kicked off Monday with a $0.10 climb to $2.14, the highest price since January 11, 2023, before sliding back $0.0650 on Wednesday, and then skyrocketing again today up $0.1325 to $2.21 per pound, the highest price since November 18, 2022, with 15 trades on the week. After barrels fell by $0.1225 last Friday, it kicked off Monday screaming right back up $0.15 to $2.25 per pound, held there for a day, then dropped $0.1275 cents on Wednesday and up again on Thursday to $2.17508 and again today to $2.26 per pound, with just five trades on the week. Dry whey continues to hover around the $0.55 to $0.56 per pound mark, with nine trades in total, while butter moved up early in the week, finding support between $3.17 and $3.20 per pound, with 43 trades in total. Nonfat dry milk jumped to $1.3150 on Wednesday, the highest price since January 3, 2023, but it rose again today to close at $1.33 per pound, the highest price since December 20, 2022, with a total of 40 trades.
(2:23) Alyssa:
Cheese was quite the move, though, and the July US Cold Storage Report came out late last Friday afternoon. What were some of the key takeaways from that report?
(2:34) Cara:
Well, cheese inventories continue to drag, and the June to July drawdown wasn’t overly surprising, but July stocks are the smallest since 2020, which helps explain the rally on the CME spot market that started mid-July. Natural American cheese is the main culprit behind total cheese decrease. Throughout this year, manufacturers have prioritized making mozzarella and gouda as opposed to American cheese, specifically cheddar, and inventories continue to dwindle. Overall, the data is neutral to expectations given the rally on the spot market. That said, the data is supportive of current prices. With the holiday season approaching and milk production in its seasonal trough, it’s reasonable to expect prices to remain above $2 per pound, at least through October.
(3:16)
On the butter side of things, stocks fell by 23 million pounds from June to July. The monthly decrease is notable, but inventories are not terrible, up 7.4% compared to last year. The USDA also revised June’s butter stocks higher, finding 3.3 million more pounds. Although the monthly decline was noteworthy, stocks are healthy, which made the result neutral to expectations. The butter market has priced in the tight milk inventories, and with the seasonal demand anticipated to increase with the approach of the autumnal and winter holidays, prices could move higher in the coming months as well.
I’ll tell you though, as astonishing as it is to see these prices in the US, I look to Europe and my jaw hits the floor. Did I see that right this week, German and Dutch butter going for $3.93 per pound?
(4:01) Alyssa:
You sure did. German and Dutch butter on the European Energy Exchange marked the highest price ever recorded, with data going back to June of 2010. This is primarily because cream prices have been astronomical, up to over $10,000/MT. Milk is tight in the region, exasperated by a hot summer, and a case of blue tongue outbreaks in Germany, France, and the Netherlands. But high prices don’t seem to put a damper on demand. As you mentioned earlier, the holiday season is approaching, which typically brings a boost in consumption. It’s hard not to balk at the prospects of even higher prices, but it’s entirely possible given the limited supply situation and rather healthy demand. It’s also interesting that you mentioned greater mozz and gouda production from the US because those sure seem to be it cheeses this year. The European mozzarella and gouda price on the European Energy Exchange also reached their highest price since October-November of 2022.
(5:02)
Cheese is in a similar predicament to butter, as demand is good and expected to improve with those coming holidays. Inventories are limited, and less milk has vats sitting empty. While prices grind higher, the rally on the CME spot market keeps European cheeses competitive against the US, while New Zealand remains the cheapest on the global market. Buyers are certainly knocking on Fonterra’s doors in search of cheese.
(5:28)
Yesterday, Fonterra released the Pre-GDT Forecast Volumes for the upcoming Global Dairy Trade event on Tuesday, where they moved contract six cheddar volumes into contract 2 and 3. Fonterra has also tweaked their 12-month offer volume forecast on whole milk powder, removing 1,500 MT from September’s auctions, 750 MT per auction and only in the C1 contract period for product to ship in October. Fonterra states that this is due to changes in product mix and reduced availability of some materials. This is a 3.4% decline from the previous forecast, but the whole milk powder offer volume for the entire auction is 7.7% more than the previous event.
(6:14) Cara Murphy:
Speaking of the Oceania and the Asia region, we also just published the Asia Dairy Import Volume Analysis this month, taking a look at import volumes for Indonesia, Philippines, Malaysia, Japan, South Korea, and Vietnam. What were the big takeaways there?
(6:29) Alyssa:
Well, Cara, across the board, I think the largest takeaway for me was the rise in whey imports up in Indonesia, Philippines, and Japan from prior year. Most of this product is coming from the US, which helps explain why whey prices on the CME have climbed in recent months. Cheese imports into Japan, the Philippines, and South Korea were up as well. However, these shipments were likely booked earlier in the year and may start to pull back following the recent climb in global cheese prices.
Well, that just about covers everything. As a reminder, CME Spot, and Globex Futures and Options will be closed on Monday, September 2nd, in observance of the Labor Day holiday. I know we’ll be enjoying the time off, and we hope all of you do as well. See you next week on Let’s Chat Dairy. Cheers.
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The post Let’s Chat Dairy – 30 August 2024 appeared first on HighGround Dairy.