This month’s Forecast Update Live from Ever.Ag Insights digs into the latest dairy market shifts. Butter forecasts take a reset, milk supply surges to levels not seen in years, and the team weighs the bullish and bearish outlooks ahead. Plus, a closer look at McDonald’s traffic trends and what they reveal about foodservice demand. Join John, Erica, Matt, and Phil as they break down where the market stands and where it may be headed.
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Hello and welcome to Forecast Updates is a video series from Ever AG Insights, where each month we gather to discuss our dairy market forecast. I’m your host John Spain Hour. We’re joined today by Erica McKee, Matt Gould and Phil Plourde to get us started. Erica, please run us through this month’s forecast compared to last months.
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We’ve made a pretty significant adjustment, a bit of a reset on our butter numbers down more than $0.15 for the rest of this year, and then shaving a bit off of 2026 as well. Other than that, cheese and powder pretty steady from last month. A slight uptick on the way. Complex.
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Thanks, Erica. All right. Each month we let our panelists take either the bull side of the story or the bear side of the story. This month, Matt has agreed to take the bear side of the story. Matt, take it away and let us know what you’re seeing out there. That looks bearish.
00;01;01;27 – 00;01;26;17
Thanks, John. The first big deal as it relates to you know the bearish outlook. It’s a I would say very popular at the moment is just a focus on supply growth. We had a USDA milk production report that stunned. You know I guess those that were complacent where we saw us milk production up 3.4% and the comparables actually become easier to beat as we move forward from here.
00;01;26;19 – 00;01;56;14
It’s clear to everyone that we are adding milk supply, and we’re adding it at a historically elevated rate. The consequences of more milk mean more of just about every every product. But particularly of note is that we are well positioned, or at least we appear to be well positioned as a nation to fill up our cheese plants. Which means, as we’re looking forward into 2026, the expectation is that the more milk is going to translate in, the much more butter and milk powder.
00;01;56;16 – 00;02;20;28
I think that’s one thing that we sell hit the market place over the last several weeks. Is this much more bearish tilt as it relates to butter in general? So this supply story certainly has people wiggling in their seats, because we haven’t seen this kind of growth in a long, long time. Now if we peel back the onion on this, a layer, I want to point out kind of a new economic phenomenon.
00;02;21;00 – 00;02;43;21
And that’s related to how dairies are making money today. Something that is a bit counterintuitive is that while dairies are making money today, at least in my estimation, the majority of the profitability is actually coming from beef. It isn’t beef outright. And the terms are call cows how we how we typically think about dairies and sending, call animals to hamburger heaven as, Jerry Dreier, my mentor, used to call it.
00;02;43;23 – 00;03;15;22
That isn’t what’s driving the profitability. What’s driving the profitability is these day old or couple day old beef, dairy crossed calves, and they have hit a record price. I was with my father this weekend, a dairy farmer. He got paid $1,600 for a brand new cars this past week here and here in New York. And what that means is that a dairy farm is incentivized heavily to keep that cow around, even if she’s not profitable on milk, but to get that additional calf.
00;03;15;24 – 00;03;31;03
And that’s a brand new dynamic that we haven’t seen before. But it gets to this point that the more milk supply train has left the station. And this is something that, you know, at least from a bearish point of view. More milk, more milk, more milk is is something that this market’s going to have to deal with.
00;03;31;05 – 00;03;49;13
Thanks, Matt. I know we’ve been looking at that perspective for a long time. And it’s like it seems like it just keeps somewhat compounding on itself. So thank you for revisiting that issue. Now we’re going to shift to Erica, who’s agreed to take the bull side of the story. Erica, take it away and let us know what you’re seeing out there.
00;03;49;13 – 00;03;50;14
That leans bullish.
00;03;50;15 – 00;04;11;26
Well, Matt was definitely looking at the supply side. All the milk coming at us. And I do think it’s the demand side that is going to have to pick up the bullish case. In this example in particular there’s a few different avenues we could look for support going forward. Obviously exports butter of cheese have been big drivers of keeping the market cleaned up.
00;04;11;28 – 00;04;37;05
And I think that’s going to have to continue. And as we’ve talked to people, it does sound like it is continuing. So as the U.S. remains fairly competitive in international markets, we’re going to need to stay there. But I think that’s going to be a large factor in the demand space domestically. I think we’re kind of two segments, one being foodservice, the other being your retail or grocery channels.
00;04;37;07 – 00;05;02;10
In the grocery space. We do see positive dairy consumption for butter. For cheese. You’re looking at scanner data on a rolling 52 week basis. Those are positive numbers. So we are seeing some movement there. I think the challenge will be can we get some more features? Can we get some more promotional activity for this fall season? With butter prices resetting quite a bit lower, there’s cross your fingers.
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Hope that we might be able to move some more butter there. And then the foodservice space. While there’s been some negative numbers in terms of traffic and sales, folks aren’t taking this line down. Again, they’re entrepreneurs. They’re business people. They need to make a buck to menus are getting rejiggered. Things are getting shuffled. How do we get people back out and spending again?
00;05;23;09 – 00;05;33;22
And I think from an overall consumer health, as long as gas prices stay affordable and the labor market holds itself together, Americans are going to be able to continue spending.
00;05;33;26 – 00;05;39;26
Thanks, Erica. Every month, Phil brings us his favorite look. Phil, take it away and let us know what you’re seeing this month.
00;05;39;27 – 00;06;10;02
Thanks, John. Playing to what Erica said about restaurants and foot traffic this month, we’re looking at McDonald’s and earlier this year, McDonald’s retooled its value menu, its $5 offering, and had a buy one get one for a dollar component that seemed to move the needle a little bit earlier this year. But our favorite look this month shows foot traffic into McDonald’s slipping, I would say, appreciably beginning, in mid-July.
00;06;10;05 – 00;06;35;24
It was running slightly negative in June. And then all of a sudden July -2% and into August -3%. And perhaps not surprisingly, in the past couple of weeks, McDonald’s said, hey, we’re going back to the extra value meal concept, where the total price is less than the sum of the parts by 15%. So it’s back to the extra value meals, and we’ll see if that spurred some activity.
00;06;35;29 – 00;06;59;15
You got to deliver value to the consumer today. McDonald’s has been a value player for a long time, and trying to engage consumers in that space is critical. And the graph this month shows clear slippage in traffic. And not coincidentally, McDonald’s is coming back saying, hey, we’re going to keep trying here. And reintroducing the value meal maybe moves the needle.
00;06;59;15 – 00;07;06;13
Maybe it helps demand we’ll see. But the restaurant space remains critical and we watch these foot traffic numbers pretty carefully.
00;07;06;21 – 00;07;34;23
Thanks, Phil. So if we were to bring it all together for mats, I would say increasing supply from Erica side saying the potential for demand, do you know step in and be supportive to possibly bullish. But then when we look at this favorite look perspective Elise. In one example here you have food service that hasn’t been feeling great, but maybe the potential to turn it around just a little bit here through the extra value meals.
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They’re trying.
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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 ever AG Insights team for the work you do 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 at insight at ever Dot egg.
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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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