In this month’s Forecast Update Live from Ever.Ag Insights, Phil Plourd is joined by Erica Maedke and special guest Kathleen Wolfley to break down the latest dairy market outlook. Butter, cheese, and nonfat milk prices are sliding, while whey shows surprising strength. The team debates bearish supply pressures from surging global milk production versus potential bullish factors like tighter margins, culling, and low prices sparking new demand. Plus, a striking “favorite look” into massive global fat growth rounds out the discussion. Stay informed on what’s shaping dairy markets in 2025 and beyond.
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Future trading involves risk.
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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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Hello and welcome to Forecast Update live video series from Ever AG Insights, where each month we gather to discuss our latest dairy market forecast. I’m your host today Phil Plaut. John is on the road and so is Matt. So we’re shaking things up a little bit this month. As always we are joined by Erica McKee. But special guest today Kathleen woefully.
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Hi, Kathleen.
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Hello.
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To get us started, Erica, please run us through the highlights of this month’s forecast compared to last month.
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I fell. I’m excited to be back again. It’s been a bit of a big shakeup. Clearly, we’ve all watched the markets come down over the last two months. Our forecast is doing the same as we look at the rest of 2025. For butter in particular, the biggest number is a negative almost $0.50 for Q3 and Q4. Also taking the rest of 2026 down almost $0.30.
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Nonfat also slipping roughly a dime, cheese down a dime in the near term, and also a little bit of a haircut to 2026. Our wave forecast is up a little bit just looking at the strength in that complex. Continuing on, go get your protein latte from Starbucks and we’ll see that. Keep going. Thanks, Bill. Yeah.
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No one I’m pretty sure no one had 160 something butter on the on the bingo card for September of 2025. And so you adjust accordingly and try to figure things out. And that’s a good segue, Erica. You know, ordinarily we have a guest on we should give them the easier argument to make.
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We should.
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Yeah. Kathleen’s really good. So we’re going to go for the bullish argument. But we’re gonna start with you today. And what’s the bearish argument.
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The bearish argument really starts with supply. And I had to write all these numbers down because it is amazing the amount of milk that is coming from various sectors around the world. All of these are August year over year numbers. United States up 3.2. New Zealand up 2.5. You move over to the continent in Europe. Germany the largest, up 2.1.
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France 4.3. Now my rule of thumb is usually something in the plus one category is enough to keep up with demand. The fact that we are floating plus two, three, 4% year over year, really strong milk supplies. They’ve got to go somewhere.
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You forgot the Netherlands a plus for eight.
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Plus four eight at the Netherlands and Poland plus for six. I mean just right down the line. Really strong. And it’s true, money makes milk. But producers on the farms have seen really good pay prices. European pay prices are still very strong. Fonterra had come out with a good strong pay price to start their season. We’re getting what we pay for and here’s the milk.
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You’re in the United States, we have capacity to process it. So it’s not necessarily sitting long on the milk side. We are moving it into commodities. We’re making salable product. And a lot of that new capacity, it is hitting the marketplace. And really the market has to do its job. Now we have the supply and we’ve got to go find a price that can create the demand to move this product.
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And I’m a little concerned about demand. If you look at foodservice, that’s been slow. If you look at cheese, domestic consumption, that’s been on a pretty negative trend for a year. So we’ve got to get to prices that really will stir up some additional demand. We have not yet seen that happen at the retail shelf. We need some more promotional dollars to get people eating dairy products.
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Kathleen, what do you got for the bullish side of the story?
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Everybody is so bearish there I’m done. That’s it.
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That makes me nervous.
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Yeah I mean historically when everybody gets on one side of the boat there’s always an opportunity for it to tip right. And I think that to me one of the bullish factors today you talk to people in the US there bearish. You talk to people in Europe they’re bearish. You talk to people in Oceania they’re bearish. The China situation certainly isn’t providing many bullish comments either.
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So I think the fact that everyone is on one side of the boat is one bullish flag that’s out there, but I’m going to stick with production and low prices. Care of low prices is my two key themes for the bullish side of the argument. On the production side, to Erika’s point, we have a lot of milk, but with milk prices coming down pretty substantially here over the last several weeks, at least from a futures perspective, tight margins are heading toward the producers.
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They may not see it in the milkshakes today, but in the next several months, we should start to see a little bit of belt tightening or potential belt tightening from the producer level. One easy way to generate cash call cows beef prices are near record high levels. Those call cows are worth a lot of money. We had the highest herd levels going back to 1993.
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There’s a huge opportunity out there to suddenly see a big reduction in cow numbers. So from a supply perspective, at least in the US, I think you are cows could be coming at the same time. Production caps are another thing to watch. There’s been some concrete talk around production caps, particularly in the West, both on the volume basis and component basis as well.
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Hearing some commentary in the Upper Midwest along those lines as well. If we start to see milk buyers put on production caps, I think there’s potential producers could respond, especially in a tight margin environment where every penny counts. So I think from a U.S. production perspective, there’s risk that we could start to see a bit of a pullback, and that could leave us with less milk available in the U.S. market.
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One last little detail, Kathleen. I’ll help you out here.
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Thanks. Appreciate it.
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We were chatting before today about monthly averages and how might that play into things in October specifically?
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Yeah, I think low prices tend to cure low prices. It’s October 1st if you’re a, let’s say, a cheese buyer that buys on a prior month average. The average for September was $1.67 for blocks. The average for August was a $1.81. There’s real savings on the table if you have the ability to load the boat a little bit heavier going into the holiday season here in October, based on those lower September prices.
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So I think to your point, though, there’s low prices care, low prices type opportunities here in the marketplace, not only from a just buyers maybe buying a little bit more than they typically would in a month or months, just given the lower prices. Or if you’re a retailer and you have the opportunity to buy dollars 75 butter compared to $3 butter a year ago, seems to me like we could see a ratchet up of promotional activity, and that could help to move a bit more that potentially more cheese through brochures.
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Over the course of the next several months, foodservice operators may take a similar tactic as well.
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All right, it’s favorite look time. I bring the favorite look this month. Kind of the matically. We’re talking about a lot of fat. Our favorite look this month is massive growth and global fat output. This is something that Zuko in our Melbourne office helped put together. And when you look at this year, we are going to see nearly 600 million more pounds of fat coming off the farm between the US, Europe and New Zealand, 272,000 metric tons of growth, a huge jump for next year.
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Our model shows another 188 million pounds, or 85,000 metric tons of growth combined. That’s up 1%. And so that’s growth on top of growth on top of growth. Whereas all the butter fat going to go. So this is a really impressive look at if you just want to say hey, feels like there’s a lot of fat in the world today.
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And this certainly is a dramatic look at that. Kathleen, thanks so much for joining us today. If you want to hear Kathleen, we have a great episode of Parlor to Plate this week. Erica led the discussion. Kathleen. Some others. Great discussion of these bearish factors. A little bit more detail. Kathleen is also the host of our new hit show Chart Chatter, where she and Zuko get together every week to peek through some charts.
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So if you want to see more Kathleen willfully look at YouTube. Look at the plate. That will do it for this month’s episode of Forecast Update Live. Thank you to all of our panelists. 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 to us via email at Insights at Evercore AG.
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And if you like this video, be sure to subscribe to 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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