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;00
VOICEOVER
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00;00;09;02 – 00;00;33;02
JON
Hello and welcome to Forecast Update Live a video series from Ever Insights, where each month we gather to discuss our dairy market forecast. I’m your host, John Spin Hour. We’re joined today by erica maggi, matt Gould and phil flawed to get us started. Erica, give us a rundown of this month’s forecast and how it may have changed from last month.
00;00;33;04 – 00;00;54;29
ERICA
Hi, John. Thanks for having me. Happy New Year to you and to our audience today. Our forecast has changed mostly on the cheese numbers. As we look at the first half of 2024, we are seeing a slow down from our expectations in terms of the amount of exports leaving the United States. We think that’s going to push things a bit lower here back domestically.
00;00;55;04 – 00;01;11;14
ERICA
As such, we’ve taken our numbers down somewhere between nickels and dimes, even for some of those months, really taking a whack to that first half. The other change is just cleaning up the nearby in butter. That’s up a little bit. Other than that, the forecast remains largely unchanged.
00;01;11;16 – 00;01;24;22
JON
Thanks, Erica. Every month, we take the opportunity to let one of our panelists take the bull perspective on the market and the other to take the bearish perspective. This month, Erica has agreed to take the bearish perspective. Erica, take it away.
00;01;24;23 – 00;01;48;02
ERICA
So as we think about the factors that influence markets coming down, there’s really one big one and that’s demand. Now, as we think historically, demand for dairy products is on a general uptrend of growth of 1 to 1 and a half percent. So it’s not like we’ve completely fallen out of bed in terms of demand, but we certainly are off that historical pace.
00;01;48;02 – 00;02;10;01
ERICA
And part of the challenge with demand is not just that depth that how much we’re off, but it’s also the breadth that as we look not just in here in the United States but around the world, we are seeing soft demand. We look to China, some economic malaise there. Demand is certainly off. Imports are down. As we look to China.
00;02;10;03 – 00;02;44;11
ERICA
Europe is another big nation states there. The European Union is also feeling a lot of pressure from multiple years of high inflation. Consumers are pushing back and saying there just isn’t enough money left and we’re seeing less dairy consumption on the continent. Also seeing challenges in Southeast Asia, some places in South America. It really is the globe that is a bit off in terms of overall demand as we think about the American consumer seeing a huge mountain of debt pile up as inflation has run high the last couple of years.
00;02;44;13 – 00;03;12;21
ERICA
People have done what they can and they’ve been resilient in their spending. Some point that Piper will have to get paid and we think that time is coming very soon. Already we’ve been seeing demand slowdown, hearing comments from major retailers, whether it’s Wal-Mart or Home Depot, looking at big pizza chains, a big user of cheese. Looking at that general sense of demand slowing down over the last couple of months and anticipation for that to continue into the next calendar year.
00;03;12;24 – 00;03;36;07
ERICA
So with that, one of the things that I’m really watching as a global indicator is crude oil. We’ve seen that definitely struggle to get over $80 a barrel. And I think that speaks generally to the economic health or lack of health around the globe. And so to be watching that as a driver underline economic growth that hopefully will spill over into dairy demand.
00;03;36;12 – 00;03;41;22
JON
Thanks, Erica. Matt, you’ve agreed to take the bullish perspective this month. Take it away.
00;03;41;24 – 00;04;07;23
MATT
You know, the bullish perspective is is really focused on the lack of supply. Global production is declining in the US and it’s also declining in Europe. In China, we’ve seen a massive slowdown in growth of supply. And just from an overall global level, when you add up all the different regions, we’re currently down. And when we look out, especially in the first half of next year, we expect those declines to continue in an environment where we’re not even low growth, we’re actually declining.
00;04;07;25 – 00;04;28;27
MATT
It’s hard not to be. But even if we had demand return closer to trend, we obviously don’t have enough supply globally to fill growth. The Polish perspective today is really focused on that lack of supply and the lack of supply in some commodities is perhaps showing its head. We are seeing strength in global butter prices. We’re also seeing strength and high protein whey prices.
00;04;28;27 – 00;04;44;26
MATT
And I think there’s a good supply side argument to make that that’s that lack of supply is supporting markets. If you want to get extremely bullish, you would have to be an argument that says demand is improving relative to then and supply is just in a status quo. We don’t have enough.
00;04;44;29 – 00;05;09;27
JON
Thanks, Matt. Erica, on your side of the argument, we would say that demand is suffering on a global perspective right now. And Matt, we would conversely say that supply across the world is either stable or shrinking. Put the two together and right now it feels like from a price perspective, the demand side is ruling the day as we’re seeing several of our prices at recent low levels.
00;05;09;29 – 00;05;17;01
JON
Thanks, everybody. Phil, every month you bring us your favorite look. Take it away and let us know what you’re looking at this month.
00;05;17;02 – 00;05;39;20
PHIL
At the risk of playing favorites and piling on to Erica’s side of the argument, this month’s favorite look does concern demand, specifically focusing on U.S. retail demand for various dairy products. Data from Circrna year to date through early November shows cheese demand at retail down about 1% for milk demand, down more than 2%. Ice cream frozen. Novelties down as well.
00;05;39;23 – 00;06;04;22
PHIL
This graph is ordered according to segment share. And so it’s fun to say, oh, look at that cottage cheese, up more than 7% year over year. Nice to see that. Tick tock influences can carry the day, but overall, cottage cheese is less than 2% of the retail pie for dairy. So you have some areas that are showing some growth like refrigerated toppings as well, but they’re not enough to move the overall needle.
00;06;04;28 – 00;06;18;22
PHIL
When we kind of weight all these numbers, we figure that retail demand is down somewhere between one half of 1% and 1% year to date. And that just speaks or illustrates the story that Erica was talking about.
00;06;18;27 – 00;06;42;00
JON
Thanks, Phil. I always think you do a nice job bringing that unique look to us. 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 air. 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.
00;06;42;08 – 00;06;59;19
JON
Please reach out via email at insights at ever dot Egg. If you like this video, be sure to subscribe to our YouTube channel. Give us a thumbs up and share with a friend. We’ll see you next month and next year for another edition of Forecast Update live.
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