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;09;09
VOICEOVER
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00;00;09;12 – 00;00;32;05
JON
Hello and welcome to Forecast Update Live a new video series from ever eg Insights where each month we gather to discuss our dairy market forecast. I’m your host john Spain. Our. We’re joined today by erica maggi and phil ford to get us started. Erica, can you give us a quick rundown about what might have changed between this month’s forecast and last month’s?
00;00;32;08 – 00;00;56;11
ERICA
Good morning, John. Thanks for having me again. Our forecast this month has a little bit of a tilt to it. So as we think about the new cheese capacity, we do see more cheese continuing to come. We’ve taken our cheese numbers down by more than a nickel as we look ahead to 2024. The flip side to that, with less milk being around and it getting pulled to cheese, that means there’s less going into the class for complex.
00;00;56;18 – 00;01;09;15
ERICA
So while we think butter is still going to be fairly stable at the levels we’ve predicted, we have taken our powder numbers up a bit for nonfat and a couple of sense there. We also see a little bit of gain in the weight complex. Again, just a couple of cents.
00;01;09;22 – 00;01;22;10
JON
Thanks, Erica. Each month we give our participants the opportunity to take either the bull or the bear case. This month. Phil has agreed to take the bear case. So what are your thoughts?
00;01;22;12 – 00;01;42;22
PHIL
Okay. I know that Erica is going to come back and talk about supply, supply, supply for the bull case. I think the bear case remains the same. And the opposite demand, demand, demand. We continue to see weak notes around demand globally, whether you’re looking at global trade, whether you’re looking at domestic U.S. demand dynamics, we are still in a demand environment.
00;01;42;22 – 00;02;06;21
PHIL
It’s not terrible, but it has no traction. And I’m continually surprised at every time we ask what’s going on with Southeast Asia, the numbers are just no good. Food inflation there has been pretty rampant. So until we see global demand get some traction, it’s hard to believe that these markets can get a lot higher. It’s almost a not bullish more than a bearish case.
00;02;06;25 – 00;02;23;09
PHIL
But then if you want to be a little bit more bearish, throw on one piece of supply, which is milk production in China. Saw the numbers this morning for October. We’ve gone from being up 1% in September, year over year to being up 2% in October. So the notion that milk supply in China was going to fade away and maybe create some need there.
00;02;23;09 – 00;02;33;23
PHIL
Right now, the supply in China still seems pretty good. So for the most part, the bear case is all around lackluster demand, uninspiring demand, and even a few supply bright spots out there.
00;02;33;25 – 00;02;41;05
JON
So I know the fresh agenda data that we’ve seen has really highlighted the lack of demand in both China and Southeast Asia. So thanks.
00;02;41;07 – 00;02;41;27
PHIL
Incredible. Right.
00;02;41;29 – 00;02;47;20
JON
Okay. Let’s move on to Erica, who is going to take the bull case this month. Erica, what are your thoughts?
00;02;47;23 – 00;03;15;23
ERICA
Well, as Phil said, on the Bulls side, it is a supply story. So if we had ever seen this in any other demand environment in history, we would definitely see prices moving a lot higher, not just a little bit. Where you look at your major producing regions, the major exporters in the world, the European 28 was down 1% year over year back in September and on a trajectory for even more contraction, the U.S. down a half a percent in October.
00;03;16;00 – 00;03;37;06
ERICA
Still seeing some trouble there to get that into positive territory. And New Zealand down 3/10 of a percent also in October. So in that case, there just isn’t as much milk. Now the solids are up slightly, so I’ll give Phil that. But at the end of the day, if you don’t have the milk, maybe we’re still going to make some cheese, but we’re certainly going to curtail power output.
00;03;37;11 – 00;04;00;28
ERICA
And we’ve seen that, especially here in the United States, where power output is down double digits every year. Now, from a demand side of things, I do think the American consumer is fairly resilient and they do continue to spend maybe not as much as the rate of inflation, but we are still in the game as consumers. And then as you look at China, I do think that’s a big wildcard at any time they can jump in.
00;04;00;29 – 00;04;19;23
ERICA
We saw them jump into the wheat market earlier this week with a big export buy. They could jump into dairy at any time like that. I don’t know that I’m going to bet on it, but we do recognize that that is a wildcard for our regular subscribers. I would encourage you to dive into the research report this month because we’re going to look at some of those cases.
00;04;19;26 – 00;04;34;26
ERICA
Our new friends from Fresh Agenda joining the team. They bring this amazing database tool and we’re going to look at some of these scenarios where what happens if milk production keeps declining and maybe we do have some decent demand. So a little teaser for everybody there.
00;04;35;00 – 00;04;55;11
JON
Well, as always, dairy pricing comes down to supply and demand, but it seems like right now we’ve got a demand case that’s extremely bearish, especially on the international front. And at the same point in time, we have a supply case that’s extremely bullish, especially on the international front. And we put the two together and we find ourselves at some relatively lackluster pricing right now.
00;04;55;12 – 00;05;03;09
JON
Okay. Every month or so brings to us his favorite look from the forecast update. So what do you have in store for us this month?
00;05;03;13 – 00;05;22;26
PHIL
Well, John, I becoming increasingly fascinated with ozempic. You’ve seen a little bit of talk about it in the media. Ozempic and other weight loss drugs increase use, I don’t know. I watch a lot of NBA on TV and I see Charles Barkley on TNT and he’s disappearing. Sort of a prominent ozempic user. I don’t know if you’ve seen it in your circles.
00;05;22;27 – 00;05;26;00
PHIL
We’re starting to see around the edges increasing popularity of the drug.
00;05;26;02 – 00;05;35;12
JON
It’s funny you bring that up. So my wife and I were at a party this weekend and I mentioned in my wife that everybody looks great. And she said several of them are on those mpix.
00;05;35;18 – 00;05;52;29
PHIL
Yeah. And so I don’t think the numbers are meaningful enough. I’d be surprised if we’re at one in 100 people using the drug. It’s very expensive. Insurance companies aren’t readily covering it, but the adoption rate is definitely increasing. And this month we take a look at some data that was provided in a report by Morgan Stanley. Some really interesting numbers in this report.
00;05;52;29 – 00;06;16;06
PHIL
First off, that obesity drug users are consuming between 20% and 30% fewer calories. Those are real numbers. And the graph we show here this month talks about the change in restaurant visits, those impact versus those impact. And you can see, you know, 70 something percent of people say that they’re visiting pizza restaurants less frequently after Ozempic casual dining, fast food, all those numbers are down.
00;06;16;08 – 00;06;37;15
PHIL
Now, it’s interesting. On the one hand, you’d say, wow, that can’t be good for dairy product demand. On the other hand, there was a great story in the Wall Street Journal this week that talked about some sideline nutrition products that could really gain in popularity side by side with drugs like Ozempic. And they definitely mentioned high protein shakes being a potential big winner and some companies positioning themselves thusly.
00;06;37;17 – 00;06;50;19
PHIL
So we’re a long ways from widespread adoption, but the food companies are looking at this. The retailers are looking at this. And I think we should be looking at this as well as a potential net negative somewhere down the line on dairy product consumption, as always.
00;06;50;19 – 00;07;08;12
JON
So I’m constantly amazed that what you and your insights team are able to bring in these unique looks that we’re taking a look at today. Okay. That’ll do it for this month’s edition of Forecast Update live. Thank you to all of our panelists. Thank you to everyone on the ever AG Insights team for their work on the forecast.
00;07;08;12 – 00;07;31;14
JON
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. If you like this video, be sure to subscribe on 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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