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;27
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00;00;09;29 – 00;00;32;10
Hello and welcome to Forecast Update Live, a video series from Ever AG 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 McKee, Matt Gould and Phil Plourde to get us started. Erica, please run us through this month’s highlights of the forecast compared to last months.
00;00;32;12 – 00;00;52;09
Hello, John. Thanks for having me back again this month. Our forecast. Honestly, it’s not that changed from last month. If anything, probably even more bearish in terms of our outlook. So in the nearby we’re just chewing up some numbers to where the market’s at right now. Up a smidge on cheese, up a smidge on powder in the nearby.
00;00;52;11 – 00;01;16;25
One caveat, especially as people are looking ahead to their 2025 budgets and forecasts, we have taken down both the cheese and the way numbers from last month, and I’d say that’s largely driven to the more we learn about additional cheese plants coming online, additional way salads coming into the market, just the uncertainty and weakness of the demand side of things that we’ve taken those numbers down.
00;01;16;29 – 00;01;30;26
Thanks, Erica. Well, every month we ask our panelists to take either the bull side of the story or the bear side. This month, Matt has agreed to take the bear side of the story. Matt, take it away and let us know what your bearish thoughts are on the market.
00;01;30;27 – 00;01;55;18
Thanks, John. To start, I want to talk deeply about demand. On one hand, we are seeing farmer demand data both and retail. And then to some degree at foodservice where we’re also seeing a lot of these foodservice companies come out with promotions. But in our channel checks, we are not hearing the corresponding bullishness that you would expect to see from that data.
00;01;55;20 – 00;02;21;04
And it’s kind of this continuing issues or the fact that there are continuing issues with domestic demand, that domestic demand in aggregate is not outperforming in this environment. And so without domestic demand outperforming, we need to have exports balance this market, which at least in the case of cheese, definitely you know, puts a downward bet on prices. So that’s kind of the cheese situation.
00;02;21;06 – 00;02;38;22
The other kind of highlight that I have in terms of bearish is way right now. Our way market is on its own planet really compared to the rest of the world. European way prices are more than a dime lower than us. So you’re talking more than 25% lower than ours. And we export typically more than half our way.
00;02;38;22 – 00;02;47;28
So we don’t tend to stay far apart from the rest of the world. And so, you know, in both those cases on cheese and on where there’s strong arguments for the bearish case.
00;02;48;05 – 00;02;55;09
Thanks, Matt. Erica, you’ve agreed to take the bull side of the story. Let us know what’s going on out there in the market that looks so bullish.
00;02;55;12 – 00;03;19;00
Well I think Matt did do a nice job talking to the bearish case. I will say if you look at demand from a bullish perspective, when you have a wholesale price that isn’t matching up with the consumer, sees with all this feature activity, additional marketing dollars getting spent, you’re going to see more volume move because the consumers are seeing a lower price than what maybe we see back at the wholesale level.
00;03;19;01 – 00;03;42;14
So just something to keep in mind. But I do think the fundamental story in terms of the bull case in the dairy markets these days is a supply driven situation. We’re going into the summer in many parts of the country. It’s hot. We do this every year. But I will say the weather forecast, especially for the coasts and the southwest, are expected to be hotter than average.
00;03;42;20 – 00;04;07;09
We’re already seeing double digits out in California. May see some additional challenges on the East Coast or down in the Texas Panhandle region. All of that is going to add fuel to the fire as buyers get nervous. The other thing, again, we’ve all been watching where avian influenza is. And when you look at the data, I want to call out that the numbers are saying, if you look at the top producing state in the US, that’s California.
00;04;07;11 – 00;04;33;20
We’ve had zero confirmed cases of highly pathogenic avian influenza. If you look at number two Wisconsin, no confirmed cases. Now, if you put New York and Pennsylvania together, they would be number three in terms of volume. Zero confirmed cases of avian influenza there. So that to me says if you believe those numbers, there’s more milk production that could possibly be impacted as that disease continues to roll forward.
00;04;33;23 – 00;04;53;17
And then just in general, our outlook for the world, I would say is flat at best. You look here in the United States, our outlook is in that, you know, 10th of a percent plus or minus range for the U.S., not a lot of growth potential, whether that’s from a margin perspective, you know, how are producers doing as well as can they get the heifers?
00;04;53;20 – 00;05;11;26
You look into the European space? Well, they may be flat to slightly up in terms of volume. They are down in terms of components like butterfat that lends itself to be tight. New Zealand we are at the start of the season. They’re hard to tell. Again, it’s a weather market there. Certainly the opportunity to be bullish.
00;05;11;27 – 00;05;20;14
Thanks, Erica. Every month my favorite part of the video is what we refer to as Phil’s favorite look. Phil. What do you have for us to look at this month? Well, as.
00;05;20;14 – 00;05;43;15
Speaker 5
Long as we’re talking about favorites, this might be one of my favorite, favorite looks. In some time this month, we have data from Place Your Eye, which is a technology company that tracks people’s movements in the aggregate and produces very interesting data on where people are spending their time. Are they going to restaurants or more, which restaurants are they going to grocery stores, etc.?
00;05;43;21 – 00;06;10;06
Speaker 5
And for the month of May, placer published its top Change list that showed the biggest year over year gains per location traffic versus 23. And topping the list was Chili’s at plus 26%. And this kind of goes back to the conversation Matt was having about promotional activity. Chili’s has been running this very prominent three for me. 1099 meal deal.
00;06;10;08 – 00;06;30;28
Speaker 5
They’ve been marketing against the fast food chain saying, hey, why pay ten bucks for a fast food burger? That’s so. So in Chili’s opinion, you can get a fully robust, you know, smash burger and two sides or whatever at Chili’s. And so clearly it’s driving traffic into Chili’s. Now, whether it’s driving cheese demand in the aggregate, there’s all kinds of questions around that.
00;06;31;05 – 00;06;52;16
Speaker 5
But for Chili’s, this appears to be working. That’s interesting in and of itself. But when you look at the list, number two is Aldi with a 23% gain in traffic. Number $3 General plus 12%. Number four, something called Ollie’s Bargain Outlet. No offense to anybody at all, but I’ve never heard of them before. But it’s bargain outlet up 11%.
00;06;52;19 – 00;07;18;09
Speaker 5
So the next three things on the list are all stores that cater to budgets or feature lower prices. And this says that the consumer is still under strain and is still looking to save money to feed their families. This chart says so much. First of all, it confirms what we believe for a long time, right? Never underestimate the laziness of the American consumer.
00;07;18;11 – 00;07;42;05
Speaker 5
We love to go out to eat. Who wants to cook, right? So Chili’s is rolling out this deal. It looks pretty attractive. You know, three things for 11 bucks. Sign me up. I’m going to go once, at least for sure. Because who wants to cook? But then when it comes back to feeding our families and looking at inflation and the impact on budgets, we are really still kind of hunkering down all of those value plays at retail.
00;07;42;12 – 00;08;06;07
Speaker 5
And I don’t think this is an optimistic chart in the main, because it’s hard to get excited about overall demand for things when consumers are still feeling pinch. Now we’re just trading around dollars to some degree, right when Aldi is winning, somebody else is losing. Maybe it doesn’t necessarily mean that aggregate food sales are down, but it does speak to a climate that is not especially constructive from a consumer perspective.
00;08;06;09 – 00;08;16;00
Speaker 5
It’s not like let the good times roll for chasing value at restaurants, or chasing value at retail for chasing value, because we have. And that’s this one’s favorite look.
00;08;16;03 – 00;08;42;21
That was a good one. Phil and I always appreciate the creative element that you bring into these. That’ll do it for this month’s edition of Forecast Update Live. Thank you to all of our panelists, and thank you to everyone on the Drag 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 insight at ever Dot egg.
00;08;42;28 – 00;08;54;24
If you like this video, be sure to subscribe on your 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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