How will October 2024’s dairy market trends affect your business? Stay updated with insights and analysis.

Summary:

The global dairy market remains dynamic, with cheese and butter futures recently dipping by 1.1% and 1.9%, respectively, signaling potential pricing relief. U.S. August data from the USDA shows a mixed bag: cheese production increased to 38.630 million pounds per day, a 1.7% boost from August 2023, while Nonfat Dry Milk (NDM) and Skim Milk Powder (SMP) production dropped 10.1% year-over-year. The butter price decline stems from a production uptick and reduced demand, reflecting a market correction. Cheese prices also fell, influenced by butterfat and protein costs. Whey prices face pressure as producers shift focus to higher-protein products. This overview highlights a cautious yet optimistic atmosphere, as the complex global dairy landscape presents challenges and opportunities for stakeholders.

Key Takeaways:

• The cheese and butter futures market is experiencing a decline, with prices dropping due to increased supply and softened demand.
• USDA reports indicate fluctuations in dairy product production, with cheese slightly increasing while butter shows a notable rise in daily production.
• Cheddar cheese exports have slowed, yet total U.S. cheese exports reached record levels in August due to strong demand from Mexico.
• Whey powder production is restrained by high demand for whey protein concentrates, impacting exports and prices.
• U.S. milk powder exports to Mexico improved dramatically despite weaker year-on-year export numbers.
• Tight milk supplies are hindering nonfat dry milk production, with potential further reductions from factors such as avian influenza in California.
• The U.S. corn crop yields have increased, leading to lower corn futures and affecting broader agricultural commodity prices.
• Trading data from exchanges like EEX and SGX show mixed results, with butter and SMP futures prices declining across various markets.
• European dairy products, particularly butter, and WMP are witnessing price decreases amidst slightly higher prices than last year.
• New Zealand’s dairy cow slaughter numbers have dropped significantly, marking a low compared to historical records.
• Poland continues to witness growth in milk and milk solid production, outperforming much of Europe regarding supply increases.
• Milk collections in the EU show a slight year-over-year decline for August, with varied results among member countries.
• New Zealand’s pasture growth index suggests favorable conditions for increased milk production in October.

The global dairy market has recently been all over the place, piquing the curiosity of dairy farmers and industry professionals. The six-month segments of cheese and butter futures have declined by 1.1% and 1.9%, respectively, leaving many wondering—and possibly concerned—about what will happen next. The ups and downs in pricing significantly impact everyone involved in dairy production and trading, reminding us of the adage “high prices cure high prices” as butter prices begin to fall from their record highs. How will changing prices affect dairy producers and the businesses that support them? Let’s look at the most recent data and trends to discover what techniques can be effective for adapting to this ever-changing climate.

Adjusting Sails Amid Price Shifts: Understanding the Cheese and Butter Conundrum 

The U.S. dairy sector is now seeing some pricing changes, particularly for cheese and butter. The recent significant decline in cheese and butter futures, which is unsurprising given the present market conditions, directly impacts the dairy market. This decline affects dairy farmers’ profitability and the entire industry’s cost structure.

Let’s examine what’s going on. Butter prices were initially prohibitively expensive. However, as the saying goes, ‘High prices cure high prices,’ which means that when prices are high, it encourages increased production, leading to a surplus and a subsequent decline in prices. This circumstance occurred when they increased production, resulting in more butter in stock and a slight decline in demand. Buyers expected decreased pricing and modified their plans accordingly.

Cheese prices have also been trending downward. The sophisticated Federal Milk Marketing Order calculations consider butterfat and protein costs essential in determining cheese pricing. The FMMO is a federal regulatory system that sets minimum prices for milk used in making cheese, and because cheese contains butterfat, butter prices play an essential role in these calculations. Thus, any changes in butter prices will undoubtedly impact the market.

Also, consider how these pricing changes may affect dairy farmers. The market strives for that ideal equilibrium where producing goods is feasible, but consumers still want to acquire them. Getting this balance perfect is undoubtedly challenging. The recent decline in pricing appears to indicate a modicum of calm in these chaotic times, implying that the dairy market may be in for some more accessible sailing soon.

USDA Dairy Insights: Cheese and Powder Play the Market Dance 

The USDA Dairy Products report for August provides a comprehensive overview of the dairy market’s trends, particularly in cheese and powder output. The data shows that overall cheese production is increasing, reaching 38.630 million pounds daily, a 1.7% increase from August 2023. American-style cheese output fell by 0.3% compared to the previous year but has recovered by 1.8% since July 2024.

Cheddar cheese, typically the main attraction due to its role in Federal Milk Marketing Order (FMMO) component pricing, has shown some intriguing changes. Even though daily production fell by 1.0% from last year, it increased by 3.3% from the previous month. This rise could significantly impact component costs because cheddar cheese is essential in determining protein prices. The ups and downs demonstrate how difficult pricing can be when cheese and butterfat values fluctuate.

However, powder production tells a very different story. Nonfat Dry Milk (NDM) and Skim Milk Powder (SMP) daily production fell 10.1% from the previous year. The decline in SMP output indicates weaker export demand, which could result in changes in the international market landscape.

Also, the decline in dry whey production should be monitored. With this cut, whey prices are under pressure and are already rising. They’re making a significant move to focus more on high-protein whey products, as converting production to whey protein concentrate (WPC) reduces conventional dry whey supplies. This development demonstrates that there is still a considerable demand for high-protein dairy products, which has the potential to disrupt the whey industry significantly.

Riding the Wave: U.S. Cheese Resilience and Milk Powder Challenges

The shift in U.S. cheese and milk powder exports demonstrates how the market is adapting to new demands, both domestic and international. Despite the challenges, the U.S. cheese market has shown remarkable resilience. Recently, U.S. cheese exports have been strong, with August numbers up 14% from last year and reaching record highs for the month. One primary reason for this development is the strong demand from Mexico, which imports a lot of U.S. cheese despite high domestic costs. This resilience is a testament to the adaptability of the U.S. cheese market.

Despite the challenges, there is also potential for market expansion. Due to rising domestic pricing and growing competition from Oceania’s increased milk powder production, milk powder exports could look better. So, August fell 0.4% from last year, but we expect a more significant loss of 7.9%. Once again, Mexico is critical, as its demand increases in the second half of the year, helping offset some early decreases in U.S. shipments. However, Oceania’s milk powder output has recently increased, and they are returning to those far-flung markets despite fierce competition. This rivalry from the Southern Hemisphere may continue to pressure U.S. exporters to adhere to competitive price methods while maintaining quality, which is critical for retaining and expanding market share in key foreign markets.

Crunch Time for European Dairy: Navigating Price Slumps and Market Dynamics

The European dairy sector is experiencing fascinating developments, primarily due to fluctuations in futures and pricing for essential items such as butter, SMP (Skim Milk Powder), and various cheese indices. Let’s look at these trends and what they signify for European dairy producers.

So, according to the most recent EEX futures data, butter prices have fallen by 2.0% in the October 24-May 25 strip average to €6,944. SMP futures fell by 1.1%, with the average price now at €2,602. So, the whey market has remained relatively stable.

The decline continues in Europe, with the butter index dropping 1.7% to €7,862. Interestingly, Dutch and French quotes reduced Dutch butter prices by 4.0%. SMP quotations fell 1.6%, owing primarily to declines in Germany and France.

Cheese prices followed the declining trend. The indices for Young Gouda, Mozzarella, and Cheddar Curd declined, although Mild Cheddar saw a slight increase. These changes indicate a problematic position for cheesemakers.

The position of European dairy producers is mixed. Lower futures and quote prices can reduce profit margins, so producers must tighten up their operations and possibly explore new markets. However, this situation also presents an opportunity for market share expansion. On the other hand, reducing input costs such as milk may assist in offsetting income losses, particularly for cheesemakers, as long as milk prices remain stable.

When we compare these dynamics to the U.S. market, we notice that butter and cheese prices are falling similarly, but there are some key distinctions. Despite modest declines, U.S. markets are holding up because of strong export demand, particularly for cheese, which may help stabilize prices. On the other hand, Europe’s export scene is relatively quiet, thanks partly to competition from other parts of the world, such as Oceania. European dairy producers are faced with a complex market environment. Some money-making issues are ahead, especially given the state of exports. The correct blend of savvy market positioning will be critical to navigating the current economic crisis.

Navigating New Zealand’s Evolving Dairy Dynamics: Strategic Moves Amid Emerging Trends

New Zealand’s dairy environment is constantly shifting, and the most recent statistics on cow slaughter and pasture growth are critical to the story. The decline in dairy cow slaughters in New Zealand in August, reaching a five-year low, is fascinating. A 36.8% decline in slaughter figures compared to the previous year indicates that things are changing. Dairy farmers may regard fewer slaughters as a wise approach to maintain or increase milk production, especially when pasture growth appears to be improving. The Pasture Growth Index is more significant than last year, and the five-year average suggests that milk output may increase when New Zealand’s peak season begins.

The worldwide scene is somewhat mixed. Fonterra’s Regular C2 WMP prices increased by 0.6% in the GDT Pulse Auction compared to the previous week, albeit falling slightly from earlier Pulse auction data. This shift reflects a subtle mood in the market, with buyers and sellers cautiously negotiating supply and demand fluctuations. So, the SGX Futures trade revealed some interesting trends. WMP trade was slightly firmer, but SMP suffered a drop, indicating underlying market pressures. Global trade data demonstrates an essential point: while pasture productivity impacts local production, international trade considerations continue to change the game for dairy supply chains worldwide.

The international trade scene significantly impacts market conditions when New Zealand capitalizes on pasture growth to increase milk output. This implies dairy farmers must monitor trends both locally and globally. What will the long-term implications of New Zealand’s domestic tendencies be? Will our grazing skills provide us with the advantage we require? These concerns reflect a more extensive discussion concerning the intricate links between production techniques and global market movements.

The Bottom Line

Dairy markets are dynamic, with prices fluctuating and demand constantly shifting. The cheese and butter sections demonstrate how complex the industry can be, driven by production statistics and export trends. We’ve discovered that international and domestic factors significantly alter the supply and demand curves. This circumstance requires industry professionals to remain intelligent and adaptable. Dairy professionals should closely monitor these market movements to ensure their plans align with the newest trends. Consider how your company can benefit from or respond to these changes. As you explore these findings, consider how the global dairy scene may alter if these trends continue and what changes your operations need to make to remain competitive.

Learn more:

• Mid-Year 2024 Global Dairy Business Review: Key Developments from January to June
• Global Dairy Market Trends July 2024: Australia’s Rise as Argentina and New Zealand Face Challenges
• Is 2024 Shaping Up a Disappointing Year for Dairy Exports and Milk Yields?

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