Welcome to this month’s Forecast Update Live from Ever.Ag Insights, where our panelists break down the latest dairy market trends. Host Jon Spainhour is joined by Erica Maedke, Matt Gould and Phil Plourd to discuss the shifting outlook for dairy commodities.
This month’s forecast sees price adjustments and highlights the key factors influencing the market, including:
Bullish Case: Matt Gould explains why U.S. dairy products are attractively priced on the global market, with a spotlight on export opportunities, especially with China and Europe.
Bearish Case: Erica Maedke outlines concerns over weak consumer sentiment, a slowdown in foodservice, and continued growth in U.S. milk production.
Favorite Look: Phil Plourd dives into the surprising milk production strength despite tight animal supplies, and the impact of higher beef prices on dairy culling trends.
Catch this insightful discussion to stay informed on the current and future dairy market! If you’d like to receive our forecast updates, reach out via email at Insights@Ever.Ag.
Questions or comments? Interested in receiving the forecast? Contact us at Insights@Ever.Ag or give us a call at (312) 492-4200.
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Hello and welcome to another Forecast Update Live, a video series from AGG insights, where each month we gather to discuss our dairy market forecast. I’m your host Jon Spain. Our. We’re joined today by Erica Maedke, Matt Gould and Phil Plourd to get us started. Erica, please run through the highlights of this month’s forecast compared to last months.
00;00;32;17 – 00;01;04;12
Good morning Jon. Happy to be here again today. Our forecast this month seeing a bit of red in the sense that we’ve taken the forecast numbers down across most of the main dairy commodities, butter and cheese, especially in the second half, down around a nickel and nonfat, taking the biggest haircut down about a dime. Just generally a sense of there’s more milk around, there’s more cows around and demand questionable way has taken a slight increase but just really true and up closer to where the market has reacted.
00;01;04;13 – 00;01;18;19
Thanks, Erica. Okay. Each month, we ask our panelists to take all of the bull side of the story or the bear side of the story. This month, Matt has agreed to take the bull side of the story. Matt, take it away and let us know what you’re seeing out there that could be potentially bullish.
00;01;18;25 – 00;01;37;29
Thanks, Jon. I want to start with what is a pretty powerful idea. And that’s that our dairy products are on sale. And what I mean by that is that when you look at prices of the dairy commodities in the US and you compare them to prices in other global markets, many of our products are particularly cheap. And I’ll call to order.
00;01;38;02 – 00;01;58;10
Our butter market is in the 230. You can compare that to Europe, which is in the three 50s or three 60s, which that spread is unusually wide. And, you know, obviously we’re on sale relative to prices in Europe. Cheese is the same story block cheddar and the one 60s EU and New Zealand cheddar and the two 20s into the 30s.
00;01;58;12 – 00;02;16;19
So I think if you’re going to make a bullish case, you know, one of the ideas that you can rest on is that, well, we’re already cheap compared to the rest of the world. What if we just convert. Now is there an argument for, you know, kind of a healthier global environment? Are you’re in that argument for a healthier kind of global environment or global export opportunities?
00;02;16;20 – 00;02;36;15
I think there are a few promising signs. So the first one is is in China. We have seen Chinese local milk prices stabilize. We’ve also seen the stock prices of Chinese dairy companies, which had been in declining, declining and declining finally stabilize. And at least since the start of the year, you’ve seen them rebound some of their losses.
00;02;36;20 – 00;02;55;02
If that makes sense. We’ve seen them come back. Things are no longer getting worse is maybe how you describe it. Just to give an example of Mengniu stock prices up 18% year to date. So the situation in China, we don’t have anyone in our network raving about the situation in China. There still seems to be trouble there, but it doesn’t seem to be getting worse from here.
00;02;55;02 – 00;03;13;18
And the prospect of China coming into the market is a big deal because they’re already low on inventories. And then finally, and maybe most importantly, is Europe. There’s a lot of news out of Europe that, you know, suggests that there may be a larger gap for the US to fill in global markets versus just milk supply. Is there a tight think you can attribute part of that to the bluetongue virus.
00;03;13;18 – 00;03;32;26
The other you know, and if you’re going to be a supreme bull, you might lean heavily on this is a potential for foot and mouth disease to spread. I think there’s currently something like 6 or 7 cases in Europe just to compare, on January 10th there was one, right? So we have seen some amount of spread, although most reports at this point in time is that it’s it’s still contained.
00;03;32;26 – 00;03;53;28
But if you’re going to make the bullish case, I’ll make the bullish case. We go back and you look at 2001 when there was an outbreak of foot and mouth disease in Europe, and particularly in the UK. UK face serious export restrictions from Europe, from the US, from Japan, from Canada. Those export restrictions helped open up a gap the US based suppliers could sell.
00;03;53;28 – 00;03;56;10
So you know that’s a bull take this month.
00;03;56;11 – 00;04;20;26
Okay. Thanks, Matt. And if I’m not mistaken, one of the elements you mentioned there were the Chinese stock prices. That was a favorite look of ours maybe 7 or 8 months ago. So it’s neat to see that, you know, continue to be part of the discussion. Thing is just a really great glimpse into what could potentially be like, as you said, not a resurfacing of Chinese demand at this point in time, but at least the stabilization of Chinese demand.
00;04;20;27 – 00;04;28;24
Okay, let’s move on to the bearish side of the story. Erica, take it away and let us know what you’re seeing out there. That could be potentially bearish.
00;04;28;24 – 00;04;48;04
While the bear story is pretty strong as I started off our internal forecasts coming down, I would say there’s both demand and supply aspects that would indicate our markets could move lower, both near and longer term. So let’s start on the demand side, because I think that is one of the real root causes for some of the weakness in our markets today.
00;04;48;04 – 00;05;14;22
You just start with consumer sentiment. The last couple of months have been a major deterioration. The last University of Michigan consumer sentiment survey was the lowest since November of 2022, and declining pretty rapidly. I think the uncertainty in today’s political environment, you can’t have a conversation without talking about tariffs just brings a lot of hesitation among buyers, a lot of uncertainty and business investment.
00;05;14;22 – 00;05;44;08
It really seems to slow down the process now from an individual consumer perspective, we’ve seen foodservice on the weaker side, and I think that’s part of consumers in a trading down and trading out type of mentality where they’re facing inflation and trying to stretch a buck and going out to eat seems to be one of the prime factors, or one of the prime ways consumers are able to adjust their spending to be able to stretch their budget a little further.
00;05;44;15 – 00;06;07;11
So from a dairy perspective, we like food service. Yeah, there’s more cheese on the pizza. Cheeseburgers, a little extra butter when you go home. We don’t generally use quite as much dairy. So that I think is a concern on the supply side here in the United States, we’ve seen really good milk production growth. In February, the United States was up 1% ahead of our expectations.
00;06;07;14 – 00;06;26;03
And I’ll let Phil share his favorite look to show one of the things that we’re watching of lower slaughter rates on the farms. And I don’t know that we’re at the point yet where farms are contracting milk supply, so there may be some more downward movement in prices yet to still get to the point of a balanced marketplace.
00;06;26;05 – 00;06;37;12
Okay, Erica, thank you for your take on things. Every month, Phil brings us what we refer to as Phil’s favorite look. So without further ado, take it away and let us see what you’re seeing out there this month.
00;06;37;12 – 00;06;59;26
Thanks, Jon. As Erica mentioned, we did see some pretty decent milk production strength in February, and we have cow numbers up to a level we’ve not seen since 2023. And we’re doing this in an environment without a lot of heifers. We’ve talked about tight animal supplies. I think it was one of our favorite looks, not so long ago about how there just aren’t a lot of replacement animal.
00;06;59;26 – 00;07;26;17
So how do you get higher cow numbers with tight replacements? Culling actually goes down. And indeed, when you look at our favorite look this month, it shows an 11% decline in average daily dairy cow slaughter in February of 2025 versus February of 2024. And that’s interesting in of itself. But I also played into, you know, we’re milking an older herd than we have in the past.
00;07;26;19 – 00;07;44;01
And then when you look at beef prices at all time highs, if things do get tight on the farm, you could see a faster than usual decline in milk production because high beef prices are an incentive to cull. So if the impulse to cull because of tighter margins is there, the beef prices are certainly not slowing that impulse.
00;07;44;03 – 00;07;48;27
So we’re accomplishing higher cow numbers with lighter slaughter. That’s our favorite look.
00;07;48;27 – 00;08;16;14
This month, as always, very interesting and bringing a very unique perspective to the argument. Okay, that’ll do it for this month’s episode of Forecast Update Live. Thank you to all of our panelists. Thank you to everyone on the Egg Insights team for their work on the forecast. And thank you, the viewer, for tuning in. If you don’t receive our forecast update and would like to subscribe, please reach out via email at Insights@Ever.Ag.
00;08;16;14 – 00;08;27;14
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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