In Forecast Update Live, our analysts gather to discuss the highlights of our monthly Forecast Update.
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Hello and welcome to another edition of Forecast Update Live, a video series from ever again size, 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 Philip Floor to get us started. Erica, please run through the highlights of this month’s forecast. Compared to last month’s.
00;00;31;06 – 00;00;50;16
Good afternoon, John. It’s a pleasure to be here again. The forecast some tweaks to both class three and class four. So in the cheese space the black numbers are down a penny for 2025. Although there’s a tweak in the shape of the curve a little bit higher in the front. Lower in the back, especially in blocks. Barrels are taken a bit of a valley through the middle part of the year.
00;00;50;16 – 00;00;57;13
Class four space. That’s definitely a big boost. We’re seeing a gain of $0.08 in both butter and nonfat.
00;00;57;15 – 00;01;09;23
Thank you Erica. Okay, every month we ask our panelists to take either the bull side of the story or the bear side of the story. This month, Erica has agreed to take the bull side of the story. Erica, take it away and let us know what you’re seeing out there.
00;01;09;25 – 00;01;33;10
Thanks, John. So again, to segue from our forecast numbers, seeing butter and powder up as much as they are really that comes back to less milk and less components and December numbers for milk supply here in the United States down 1% if that trend continues. Now, part of that is avian influenza. We hope that isn’t a trend that’s ongoing and that that is dealt with quickly.
00;01;33;10 – 00;01;53;07
But underlying that is also just an ongoing are we going to see milk come particularly with the new capacity? Who’s going to get it? Who’s going to get shorted a little bit. Certainly you take a little bit less milk here in the United States, a pull from the new cheese plants. And there’s definitely going to be some more tightness in that class for in the balancing capacity.
00;01;53;07 – 00;02;16;17
The other thing to keep in mind from a demand perspective, I would like to look at the glass is half full and see that the demand numbers are still positive. And as we look at week to week sales, the holidays were pretty decent. We’ll see how the Christmas numbers and New Year’s numbers come in. We still have that cheese holiday of the Super Bowl coming in February, so we might see some additional demand come through for cheese.
00;02;16;17 – 00;02;25;07
But I would say I still count that as bullish and fairly positive, especially when you add in the likelihood of exports leaving the United States in that demand category.
00;02;25;10 – 00;02;31;21
Thanks, Erica. Okay, Matt, you’ve agreed to take the bears out of the story. Take it away and let us know what you’re seeing out there.
00;02;31;21 – 00;02;58;02
Hopefully I can pick up where I left off because, you know, I want to start with milk supply and just the reality of the situation is that California was beaten very badly by bird flu in November. Total milk production was down nearly 10% there. I don’t think I’ve seen a number like that in my lifetime. But to put that in perspective, if we remove California from the equation, then total US milk production would have increased by 0.8%, so we would have been growing.
00;02;58;02 – 00;03;17;12
And so you know, another way to put that is that as we recover from this, bird flu situation in California, I think the data says, well, we don’t have enough milk today. But as we get deeper into next year, more is coming. And certainly there needs to be more milk coming because the story is that we have cheese plants, cheese plants, cheese plants next year.
00;03;17;14 – 00;03;38;20
Think we have five cheese plants or so cheese plants across five states ramping up. And with that kind of growth and supply, we’re going to need just phenomenal domestic demand to keep us in balance. And as things are shaping out, I don’t think we have phenomenal domestic demand, which leaves us in a situation where we’re extremely dependent on exports next year.
00;03;38;21 – 00;03;54;03
Now, you throw in a wrinkle of of trade policy that’s going to be shifting back to the negotiating table and with more supply coming at us, a domestic demand environment that’s not amazing and just some risk on the export front. Think that paints a pretty price negative picture next year.
00;03;54;07 – 00;04;06;18
Thank you Matt. And thank you again Erica. Okay. Every month Phil brings to us what he refers to as his favorite. Look, I know it’s certainly grown to become my favorite look, though. I’m excited to see what you brought to the table this month.
00;04;06;19 – 00;04;22;16
Thanks, John. And why I’m bringing to the table this month actually comes from a thought that Matt had, and some research you did around restaurant growth. And the U.S. restaurant industry has been kind of chopped along this year, struggling. And it’s really mature in a lot of ways. It doesn’t mean they’re going to go away or retreat necessarily.
00;04;22;16 – 00;04;56;06
When you look at the US major restaurant chains, the United States, especially those that use a lot of cheese, they’re not growing much of the U.S. they’re growing hugely internationally. And so the look that we put together, this one shows the year over year change in the number of outlets, net outlets for McDonald’s, Domino’s, Pizza Hut and Papa John’s, what they’ve done in the past year in the US versus internationally and the US, those combine those four chains, added 193 outlets over the past year, whereas outside the United States they’ve added more than 2700.
00;04;56;09 – 00;05;18;27
And so lots of growth outside the United States. And I think this is intriguing for a couple of reasons. You know, we need to export more as we add more capacity for cheese without understanding all supply chains around us. I don’t think it can be a bad thing for U.S. cheese exporters that the same customers that we have here in the US for a lot of cheese are the same customers that are growing internationally.
00;05;19;00 – 00;05;38;09
And so as a conduit for export sales going forward. While, yeah, maybe it’s a bummer that the US growth is not going to be what it was, there’s still a lot of opportunity internationally and that’s pretty important. So it’s a great look that Matt put together 2700 new outlets McDonald’s, Papa John’s, Domino’s and Pizza Hut outside the United States over the past year.
00;05;38;09 – 00;05;39;10
So best of luck this month.
00;05;39;14 – 00;06;04;21
Thanks, Phil. I really appreciate it as always, and look forward to seeing what you bring next month. Okay, that’ll do it for this month’s episode of Forecast Update Live. Thanks 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;04;25 – 00;06;16;07
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