Global dairy markets are shifting fast. European butter prices are tumbling, U.S. cheese exports are surging, and China’s demand picture looks weaker. Meanwhile, Australia’s trade balance raises the question: could it soon become a net dairy importer?
Stay tuned as Kathleen and Vuko break down the charts that matter most.
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Future trading involves risk and is not suitable for all investors. Content provided in this segment is meant for educational purposes and is not a solicitation to buy or sell commodities.
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Welcome to the inaugural edition of Chart Chatter. Spend ten minutes with two. Ever add colleagues into wildly different time zones to nerd out on a half a baker’s dozen charts looking at what’s happening in the global dairy market? I’m Kathleen, market intelligence director at Ever AG Insights in the US.
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And I’m a senior analyst for Avery Global Insights in Australia.
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And together we’re the hosts of Chart Chatter. Lucho, it’s 5 p.m. in Buffalo, New York. It’s 7 a.m. in Melbourne. How is September 4th treating you today?
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Very well actually. Early morning here in Melbourne. We are just at the start of our spring and very excited to be part of the podcast.
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For those of you who are regular viewers of the take on global dairy markets, we do hope that you enjoy this adjusted format. Clearly I’m not Joe Buchholz, not Steve. We will do our best to match their energy and their market expertise. I don’t know if we’ll go. I think we’re going to try with their humor, but they’ve set a pretty high bar.
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Definitely. Yeah.
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All right. So this series is all about dairy markets through the eyes of the chart. We’ve got some really great visuals today starting with GDP. Tell us what happened.
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Yeah. So Caitlin GDP we saw declines going into the New Zealand peak. There was certainly a bearish market sentiment going into the event, particularly coming from the EU butter and cheese markets as well as the U.S. butter market. Fonterra also increased its volumes on offer for butter in May and relative to its previous forecast, hormone powder fell more than expected based on futures.
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Its relative demand was one of the worst in memory as our chart here shows, China involvement picked up from the previous event by about 4000 tonnes, any increase the share of total purchase to more than half the volume. Southeast Asia and the Middle East also seasonally increased their purchase, but their shares of total volume sold fell to multi-year low for this time of the year.
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France, on the other hand, performed relatively well. China buyers picked up the most butter, accounting for nearly 80% of total purchase volume. Now, due to the October 25th butter is very close to about €6,000 a ton. Would you still below European pricing? And the question is, will this give a signal to the Europeans and lead European prices lower?
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Schiller was an outlier overall, and the weighted average price actually increased 3.5%. Keep in mind that in China on GDP, the volumes are relatively small, and so far U.S prices haven’t been able to push New Zealand cheese lower.
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Puka. Looking at this chart, specifically, that red dot in the lower left hand side of the chart toward the end of that line that was this event’s demand. What do you make of that?
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Yeah, demand will was relatively low, I think outside due events in August 2023 and Covid. This is some of the worst relative demand ratios that we have seen on GDP. It just tells you how bleak the the situation is on the demand side.
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Yeah. So China picked up a little bit more. But they were really the only ones. Right. It’s not like everybody was jumping all over each other to try to get more product. The Chinese buyers were in Southeast Asia. Not all that engaged the Middle East, not all that engaged. And here we have a one and a half demand for Omo powder.
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Yeah. And that’s the average during the first six rounds, it’s a very low average relative to other events. And keep in mind that as we go up towards the New Zealand peak, new production season volumes on offer on duty are seasonally rising. Right? So at the same time, if demand falls on GDP, the price will absolutely reflect that will.
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Go today for the US charts. I think we’re going to talk about the butterfat market here in the US, because it’s been a pretty hot topic and I’m going to start with butter fat production at the farm level. And it’s been pretty astounding. Turns out producers in the US have figured out how to make more fat out of their their dairy cows, or we’re just making more, more fat at the farm.
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How are we doing it? Genetics. That’s a big one. Cow comfort. It’s another one. Beat adjustments are another. Folks are feeding more palm oil. There’s another product that has high oleic. So soybeans that are helping as well as palm feeding. So overall we’re just making a lot more fat. July fat tests in the US hit 4.13%. That was up from 4.07% in 2024.
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You combine that with a 3.4% bump in milk production in the month of July, and fat production off the farm increased by 5% year over year. So as we think about cream supplies in the US, butter supplies in the US compound that with expanding that production at the farm level and suddenly the picture makes a lot more sense.
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There’s just a lot of fat around. What are you thinking, Buko from a global milk supply perspective.
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Today we’re actually publishing our August 2025 Global Dairy Market outlook. And from the menthols and projected product volumes have certainly weakened since our last update in July. Milk production is growing better than expected live by the US like you just mentioned, but also in the European Union and New Zealand, while at the same time some South American countries like Argentina and Uruguay are recovering on week 2024 comparables, New Zealand will definitely have another grilled cheese.
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I’m in 2526. By all accounts, conditions are good over there. Milk prices are profitable and peak imports for supplementary feed have been very strong in the EU. Weekly milk production data in Germany and France looks very strong, and bluetongue disease outbreaks appear to be very limited outside of France this year. Meanwhile, the demand in these large domestic markets of the European Union and the US remain sluggish.
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On the other hand, we have global trade improving in the background, but most of that growth has been in cheese and fats, while milk powders are weaker. We mentioned China earlier. Not much is changing in the outlook for Chinese import demand. This month. Their local market has been oversupplied for a while despite having falling milk production, so their milk prices are still declining and they’re actually been exporting Hormel powder.
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We just it’s another indicator of how oversupplied the market is.
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I’m going to take the mic back here, go back to the US butter market. And I’m excited to talk about U.S butter and butter fat because for the first time since December of 2021, U.S. butter prices on a spot basis are down near $2 per pound. Prices are down about $0.40 in a month. And if you were to look at the cold storage report from a couple of weeks ago, is the July cold storage report and current prices, you might say, you know, something just doesn’t it doesn’t make sense.
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The cold storage report said inventories were down 24 million pounds from June. That was well above average in terms of the month to month draw. Inventories were down 6% year over year. But when we look around and talk to folks in the industry, there is a persistent mantra of supply abundance from a cream supply perspective. Like I said, there’s a lot of fat coming off the farm.
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I don’t think ice cream demand has been all that great this year. Cream cheese demand hasn’t been all that stellar either. So you put that together with okay, butter demand and suddenly you have this picture of cream abundance churns have been a bit more active through the summer months than what we would typically see folks that were in the carry trade.
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So they they bought ahead early, sold futures against it. And now we’re trying to roll out of those positions. They seem to have plenty of butter butter available to the marketplace. And I think on the demand side, those folks seem to be pretty well covered. And they’re not necessarily coming to the market with open arms saying, hey, I need your product.
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So I think that we’ve we’ve set up for a pretty interesting end of the year. We’re looking at 2019 is an analog year, certainly we saw a fairly similar pattern of growing milk supplies. Pre market was relatively weak. I think that the big indicator that I’m waiting to see here in the butter market is what does the export picture look like.
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We do have a export report on September 4th, which will give us a little bit more of an inclination of how well was the butter export pipeline filled at least through July?
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That’s a very good chart. Caitlin. Makes me think what happened to the U.S. butter market since Covid? Why have prices been higher than the prior five years? And what do we think will happen in the U.S. butter market for the rest of 2025? Are we going higher or are we going to follow the 2019 line?
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Well, I think you’re asking kind of $1 million question or more. I think from a perspective of why have prices been so high relative to Covid prior to Covid, we did see these $2 plus type prices. Covid we saw down year and then prices jumped back up. So we are in this position where I think that that is no longer the enemy.
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And we’ve seen these stronger prices overall or this strong demand helping to support values for butter. At the same time, I think that folks on the buy side haven’t wanted to be caught short. So that ultimately is lending a supportive hand to that. Folks continue to see budgets that are above $2, and so almost a self-fulfilling prophecy to some extent.
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What do we see going forward? I wouldn’t be surprised if prices test that $2 price point or a little bit below, but to some extent, I wonder if it’s a bit of a psychological price point that will the buyers step back in at these $2 or sub $2 prices? What do you think on the global butter market? Local.
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Yeah, global butter market remains very topical over the past month. I think they’re fine with some tricks starting to appear in the European butter market, where prices were very high for a prolonged period of time. But I think now market participants are expecting a significant stock built in 2025. And certainly the price reflects the falling European butter prices are are very important actually, because they tend to flow into the EU cheese prices, which ultimately affect the US competitiveness on the on the global cheese market, as we can see on the on the chart here, which is done post GDP, the EU is still the most expensive origin on the global market.
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U.S. at the same time, like you mentioned, it’s probably going to take the $2 psychological level, but but remains cheap. And it’s even below New Zealand IMF which means New Zealand Damien. And current market prices can make its way to the U.S West coast.
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All right Buko, can I get a drumroll? Okay.
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What the chart of the week.
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This is not a dairy chart so forgive me, but coffee prices I promise that there’s a dairy tie in here. Arabica coffee futures are up 39% over the past two months. That’s a pretty big spike kind of back up to where we were sitting in prices back in April. Brazil weather is part of the concern here. And what’s driving futures higher in the coffee market?
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U.S retail prices. If you’re going to go out and buy a pound of coffee, the average American is going to spend around $8.40 per pound was in July. And that’s before tariffs really impact those coffee values. So if you have a coffee habit and you like to go to your your coffee shop every morning to get a cup of coffee or a latte or something like that, what price point does it start to change how you go about your day?
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Do you start making coffee at home? You don’t put the good stuff in there. You don’t put as much milk. Maybe you don’t get a latte. You just have a black cup of coffee at home. Do the higher prices start to change people’s attitudes and people’s consumption patterns? For not just coffee, but also dairy, we consume a ton of fluid milk through coffee shops, and I would say even at home, people are putting milk or other types of creamers in their coffee.
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But if you’re at a coffee shop and it’s $8 to buy a latte, do you opt for the $4 black cup of coffee just to save a few bucks? I don’t know, this is an interesting one to me. It we’ll see it if it spills over into the dairy side and ultimately impact fluid demand, particularly in the US.
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But to me, coffee prices are definitely one to watch. That’s it for chart chatter this week, a huge thanks to Zuko for his data wizardry, and to Nana and the marketing team for mixing and mastering. If you’d like to learn more about how the ever I insights team can support your business, or if you have chart requests, please contact us at Insights at Evercore.
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And last but not least, we’re going to stick with the theme, the coffee theme here, a coffee toast to Steve and Joe. Thank you for charting the way. Cheers, cheers.
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