In Forecast Update Live, our analysts gather to discuss the highlights of our monthly Forecast Update.

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00;00;00;20 – 00;00;10;03
VOICEOVER
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00;00;10;05 – 00;00;32;21
JON
Hello and welcome to the Forecast update live. A new video series from Ever AG Insights, where each month we gather to discuss our dairy market forecast. I’m your host, John Smith, now. We’re joined today by Erica smedley, Matt Gould and Philip Ford. To get us started, Erica, tell us about this month’s forecast and if anything has changed from last month.

00;00;32;22 – 00;00;50;14
ERICA
Hey, good morning, John. Thanks for having me back again. Honestly, there isn’t that much that has changed between this month and last month’s forecast. So folks will notice that we are down a few pennies in the major commodities of cheese, butter and nonfat where we have taken up a little bit.

00;00;50;20 – 00;01;08;09
JON
Thanks, Erica. Okay. Every month we like to bring a unique perspective here and look at it through either the bull lens or the bear lens. And we like to switch up the opinion that people get to take this month. Matt is going to give us the bull case for the dairy markets. Matt, take it away.

00;01;08;11 – 00;01;33;26
MATT
Thanks, John. Yeah, the book is pretty simple, I think, in this environment. It’s all about milk supply. And so in the U.S. for a variety of reasons, including cost of money, our margins this year and based programs that are in place, the U.S. is not tracking toward significant growth anytime soon. Actually, we don’t think that we’re going to have significant growth until the second quarter of next year at the earliest.

00;01;34;02 – 00;01;59;27
MATT
Outside the U.S., our milk supply growth is also constrained in Europe and New Zealand. Recent data show weakening supplies. And in Argentina, in the U.S., the trend is somewhat sideways. And of course, then there’s China. And in China, it’s been a very challenging margin environment this year. And fluid milk demand is also a serious headwind. And so there, too, we believe milk supplies are declining.

00;02;00;02 – 00;02;24;27
MATT
So to recap, milk supplies are constrained in the U.S., in Europe and New Zealand and China. It’s really hard not to be somewhat bullish in that environment, even if you’re a big bad bear. I think there’s a limit to even how bearish one can be in this environment just because we don’t have enough supply globally. Now, while I’m generally supportive, I want to add some some caveats here.

00;02;25;00 – 00;02;42;18
MATT
A supply constraint environment is good, but to paraphrase my colleague Bill Crowley this week, the best rallies happen when supply is down and demand is really, really, really good. And to be frank, demand isn’t really, really good. So while I’m bullish, I’m not strapping on my moon boots.

00;02;42;21 – 00;02;51;24
JON
Bullish. Matt, thank you very much for your perspective on the bull case. Erica, this week you’re going to talk about the bear case. Go ahead and give us your perspective.

00;02;52;02 – 00;03;14;00
ERICA
Well, thank you, Matt, for setting that up for me. In terms of what is bearish and it really is demand. So as we think about U.S. consumers, we’ve seen some slowdowns at retail recently, very little good news out of the foodservice space, quite a bit of challenges out of big pizza. And as we think about the overall macroeconomic environment.

00;03;14;03 – 00;03;35;24
ERICA
Yes, GDP in the U.S. was up very nicely in Q3. But if you dig into the details. Thank you, Phil, we will see that a lot of that is based on credit. And so I do think there will come a day of reckoning. Now, it may not be before Christmas. I think people will still buy their Christmas gifts and enjoy the holidays, but there will be some big bills coming due.

00;03;36;01 – 00;03;59;21
ERICA
And so I think the real challenge becomes, as you look at 2024, where is that demand going to be? Are people going to be spending more at home versus eating out globally as we think about demand? There’s also some weakness there. So Matt had mentioned China, and if you look at year today, imports of whole milk powder through September, that number down 38%.

00;03;59;22 – 00;04;24;00
ERICA
The other bad news story is Southeast Asia through August year to date, they’re down 26% on all of power. So, again, not a great environment to be looking for a big price increase there. And as Matt story on the bulls side looks at milk production, I would say that the other challenge there is while we may have less volume, there’s less water in that milk.

00;04;24;03 – 00;04;29;10
ERICA
There’s more fat, there’s more protein, which at the end of the day does make more product.

00;04;29;13 – 00;04;48;27
JON
Thanks, Erica. Both you and Matt have given us a lot to think about there. Every month we like to have Phil bring us his perspective through a slide that we like to call our favorite look. So this month is related to the global dairy trade. What can you tell us about what’s going on out in the world of the international dairy markets?

00;04;48;28 – 00;05;14;15
PHIL
It goes right back to what Erica was talking about just a minute ago. That trade into places like China and Southeast Asia has been really soft this year. And we’ve recently joined forces with fresh agenda and our new teammates in Australia have great tools for looking at movement of products around the world. And so they have this great look on global dairy trade in milk solid equivalents.

00;05;14;17 – 00;05;41;24
PHIL
And when you look at that graph that we’re featuring this month, it shows that global trade is down 1.1% compared to where it was a year ago and down 3.7% versus the peak in August 2021. And so it illustrates the lackluster traffic, the failure to catch a gear. And when we’re wondering why, you know, just how to illustrate soft ish global dairy demand, it’s a really pretty good visual.

00;05;41;26 – 00;06;07;23
JON
Thanks, Phil. And I think that, again, really does reinforce both the points that Matt and Erica were making in terms of, yes, we do have reason to believe that milk production growth won’t be robust and that is a bullish factor in the market. But underlying that is a weaker than what we might want to see. Demand factor out there in the international markets, which might limit, if not hinder, some of the upside of pricing.

00;06;07;29 – 00;06;30;10
JON
That will do it for this month’s episode of Forecast Update live. Thank you to all of our panelists. Thank you to everyone on the AG Insights team for their work on the forecast. And thank you, the viewers, for tuning in. If you don’t receive our forecast update and would like to subscribe. Please reach out via email at insights at ever dot egg.

00;06;30;12 – 00;06;41;24
JON
If you like this video, please be sure to subscribe to our YouTube channel. Give us a thumbs up and share with a friend. We’ll see you next month for another edition of Forecast Update live.

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