By Alyssa Mitchell
CHICAGO — The unprecedented market volatility of the past few years shows few signs of improving in the near future as the world grapples with labor and supply chain challenges, inflation and the ongoing Russia/Ukraine conflict that continues to exacerbate feed shortages.
Dairy market analysts discussed these issues and their future outlook at this week’s Dairy Outlook Conference in Chicago, hosted by HighGround Dairy.
In a session on the U.S. and global dairy market outlook, HighGround analysts Lucas Fuess, director of dairy market intelligence, and Alyssa Badger, director of global operations and insights, provided an overview of the current challenges facing U.S. and global dairy markets as well as HighGround’s price forecasts for the months ahead.
Fuess notes that earlier this year, commodity prices soared in an inflationary environment. Higher prices were supported by tighter supplies and firm demand both domestically and abroad.
Then more extreme headwinds emerged, he says. The Russia/Ukraine conflict has impacted food supplies across the globe, inflation has worsened and stakeholders continue to grapple with supply chain challenges.
He adds the VIX (Chicago Board Options Exchange’s CBOE Volatility Index) has more than doubled in the past year to rise above 30.
“Investors assume volatility is here to stay, with the expectation for the index at the end of 2022 to remain near 30, much higher than the long-term trend,” Fuess says.
“Policymakers will struggle to rein in surging inflation without sending the economy into a deep recession,” he adds.
These factors in many cases lean bearish for dairy prices but ultimately will spur market volatility as continued tight milk supplies keep prices elevated, Fuess says.
Several significant occurrences have happened this month alone, Fuess notes:
• The S&P 500 fell more than 20% since the beginning of the year.
• Following weaker sales, major retailers such as Target, Walmart and others cautioned about weaker profitability as they prepare to steeply discount excess unsold inventory in the coming months.
• The Federal Reserve plans to hike interest rates at the steepest pace since 1994, following a half-point increase in May.
• Retail sales dropped 0.3% in May as inflation negatively impacts consumer spending.
• The U.S. dollar hit a two-decade high, driven by fears of a global economic slowdown and assumptions about further U.S. Fed interest rate hikes.
Fuess notes a strong dollar makes dairy purchases more expensive for global importers.
Meanwhile, U.S. milk output continues to lag, slightly weaker than HighGround expectations in April and May, he says, noting a lack of herd size growth into the second quarter means cow number gaps have increased versus the prior year
He adds while milk production could return to growth of 1% to 1.5% later this year, it still lags behind the 2% growth seen in past years — not enough to push markets into an oversupply situation.
“On a global basis, milk in all key regions has been weaker for several months, keeping values supported,” Fuess says.
• Commodity price forecast
With extraordinarily high feed costs, even with milk prices at multiyear highs, U.S. dairy farmer profitability has not increased, Fuess says.
Feed, labor, energy and other costs all have climbed, putting breakeven at $22 per hundredweight or higher.
“Farmers are not getting a firm price signal to expand output,” he says.
Still, in recent months, many cheese and dairy processors have announced plans to expand capacity, with many project completion dates slated for 2023/24.
Spot cheese values at the Chicago Mercantile Exchange (CME) in recent weeks have been elevated.
“Robust foodservice needs have supported the cheese market this year, with export orders at record levels,” Fuess says. “Lower Cheddar production has been offset by additional Italian-style and other style output.”
The spot cheese market has corrected lower in the past week as buyers and sellers search for equilibrium, he adds. However, while spot cheese fell 14 cents last week, CME futures markets still show premium prices, and HighGround’s forecast shows cheese above $2 per pound through November.
Butter has been one of the more stable markets, Fuess notes.
“Weak production, low stocks and heavy demand have caused the price to surge this year,” he says. “There is little price downside expected; it is possible there will not be enough product to meet needs.”
He adds that the record high CME spot market price for butter is $3.1350, with strong potential for a new high this year,
Meanwhile, the nonfat dry milk market is “one to watch” — both domestically and globally, Fuess says.
“Significant downside is not expected in the immediate term, with values underpinned on still tighter availability,” he says, noting market analysts are closely watching the China economic lockdown situation for signs of improving demand.
Whey also has been impacted by lower Chinese demand, which pulled values steadily lower from a record high earlier this year.
“Support materialized at $0.50 per pound, but slightly bearish signals have emerged,” Fuess says. “Higher output and firming stocks could tip that market slightly lower in the coming months.”
• Global outlook
U.S. dairy exports — regardless of logistical challenges, higher shipping costs, port congestion and other struggles — have been able to maintain pace versus last year’s record volume, Fuess says, noting global demand for U.S. products is helped by competitive U.S. prices compared to international counterparts.
Taking a closer look at the global picture, Badger notes Europe is facing its third summer of drought concerns, and the Russia/Ukraine crisis is propelling input cost concerns.
Jukka Likitalo, secretary general at Eucolait, provided some additional insights into the European market.
He notes the global market is in a new era where traditional supply and demand factors increasingly are replaced by the effects of climate shocks, the pandemic, geopolitics, conflicts, regulations and rapidly evolving consumer preferences.
In Europe, high milk prices no longer mean increased production, which is constrained by soaring input costs, lack of generational renewal, environmental constraints, extreme weather events and overall policy direction, he says.
“Sufficient availability of milk is no longer a given,” he says, noting however there are some regional differences within the European Union (EU).
“Reduced milk production in the EU and a slowdown of exports seems like a likely scenario,” he adds, noting the United States has had an opportunity to gain some export market share.
Looking at other key exporting regions, Badger notes there have been almost eight consecutive months of negative milk production in key regions, without many signs it will change anytime soon.
Australia is grappling with increased farm property prices and shrinking milk herds, as well as labor shortages, she notes.
“Dairy farmers in the region are choosing to retire earlier amid concerns about input costs and labor,” she says.
Labor costs also are an issue in New Zealand, Badger notes.
However, Argentina is showing milk production gains the past two years, which has helped fulfill global demand for whole milk powder, but margin pressure there is starting to worsen, with inputs less accessible, Badger says.
“A lack of milk supply from key export markets is coinciding with growing demand from developing countries — how will we fulfill this demand?” she asks.
While imports from China have slowed, demand from Southeast Asia has somewhat offset this slowdown, Badger notes.
“Approximately 70% of the world’s malnourished children are in Asia, which has impacted product development to that segment,” she says, noting 74% of Indonesia’s milk is imported but is mostly shelf stable and geared toward younger consumers.
Demand is expected to continue in that region due to positive perceptions of milk and protein and a lack of refrigerated warehouse space.
Badger notes that in general, it’s challenging to make decisions in this environment without a historical measure for current times.
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WEST ALLIS, Wis. — Dairy manufacturers from across Wisconsin submitted more than 300 entries for the 2022 Wisconsin State Fair Dairy Products Contest, which took place yesterday at the Wisconsin State Fair Park. The contest featured more than 40 classes for cheese, sour cream, butter, yogurt and milk.
The 2022 Grand Master Cheesemaker, Grand Champion Butter, Grand Champion Yogurt, Grand Champion Sour Cream and Grand Champion Milk will be announced at the Blue Ribbon Dairy Products Auction on Aug. 11 at the Wisconsin State Fair Park. The Blue Ribbon Dairy Products Auction is a fundraiser for the Wisconsin State Fair Dairy Promotion Board. Auction proceeds fund scholarships for students pursuing dairy-related degrees and support the board’s interactive educational display — Dairy Lane — located in the Lower Dairy Barn at the Wisconsin State Fair Park.
The top entries in each class include:
• Mild Cheddar
First: Kevin Walski, Associated Milk Producers Inc. (AMPI), Blair, Mild Cheddar, 99.150.
Second: Ankit Patel, Land O’Lakes, Kiel, Mild Cheddar, 98.875.
Third: Timothy Stearns, Land O’Lakes, Kiel, Mild Cheddar, 98.725.
• Aged Cheddar
First: Henning’s Cheese for The Artisan Cheese Exchange, The Artisan Cheese Exchange Ltd., Sheboygan, Deer Creek The Imperial Buck, 99.900.
Second: Henning’s Cheese for The Artisan Cheese Exchange, The Artisan Cheese Exchange Ltd., Sheboygan, Deer Creek The King, 99.650.
Third: Henning’s Cheese for The Artisan Cheese Exchange, The Artisan Cheese Exchange, Sheboygan, Deer Creek The Stag, 99.500.
• Colby, Monterey Jack
First: Henning’s Cheese for The Artisan Cheese Exchange, The Artisan Cheese Exchange Ltd., Deer Creek The Robin, 98.925.
Second: Widmer’s Cheese Cellars Team, Widmer’s Cheese Cellars Inc., Theresa, Traditional Colby, 98.375.
Third: Shawn Sadler, AMPI, Jim Falls, Colby Jack Blend of Colby and Monterey Jack cheese, 98.025.
• Swiss Styles
First: Team Deppeler, Chalet Cheese Co-op, Monroe, 22# Wheel Swiss, 98.400.
Second: Richard Buss, Jr., Chalet Cheese Co-op, Monroe, 40# Baby Swiss, 98.000.
Third: Mark Grossen, Prairie Farms Dairy Inc, Shullsburg, Baby Swiss Wheel, 97.650.
• Brick, Muenster
First: Tylan Saglam, Klondike Cheese Co., Monroe, Buholzer Brothers Brick, 99.350.
Second: Tylan Saglam, Klondike Cheese Co., Monroe, Buholzer Brothers Muenster, 99.075.
Third: Steve Stettler, Decatur Dairy, Inc., Brodhead, Muenster, 99.050.
• Mozzarella
First: Pat Doell, Agropur, Appleton, Low Moisture Mozzarella, Whole Milk, 99.400.
Second: Jeremy Robinson, Agropur, Appleton, Low Moisture Part Skim Mozzarella, 99.300.
Third: Ben Shibler, Ron’s Wisconsin Cheese LLC, Luxemburg, LMPS Mozzarella Cheese Whips, 99.250.
• String Cheese
First: Kevin Entringer, Baker Cheese Factory Inc., Saint Cloud, Low Moisture Part Skim String Cheese, 98.900.
Second: Dan Schwind, Baker Cheese Factory Inc., Saint Cloud, Low Moisture Part Skim String Cheese, 98.775.
Third: Ben Shibler, Ron’s Wisconsin Cheese LLC, Luxemburg, Mozzarella String Cheese, 98.650.
• Blue Veined Cheese
First: Carr Valley for The Artisan Cheese Exchange, The Artisan Cheese Exchange Ltd., Sheboygan, Deer Creek The Indigo Bunting, 99.200.
Second: Team Emmi Roth-Seymour, Emmi Roth, Fitchburg, Roth Buttermilk Blue Cheese, 98.675.
Third: Team Mindoro, Prairie Farms Dairy, Inc., Mindoro, Danish-style Blue Cheese, 98.575.
• Feta
First: Charles Henn, Agropur, Weyauwega, Feta, 99.900.
Second: Kristi Hughes Wuthrich, Klondike Cheese Co., Monroe, Odyssey Feta in Brine, 99.750.
Third: BB Feta Team, Agropur, Weyauwega, Feta, 99.700.
• Flavored Pepper Cheese
First: Team Shullsburg-Jerry Soddy & Donovan Taylor, Shullsburg Creamery, Shullsburg, Salsa Cheddar, 98.725.
Second: Beh Shibler, Ron’s Wisconsin Cheese LLC, Luxemburg, Jalapeno Mozzarella Cheese Whips, 98.275.
Third: Jacob Metz, Wisconsin Dairy State Cheese Co., Rudolph, Pepper Jack, 98.225.
• Flavored Soft Cheese
First: Crave Brothers Team, Crave Brothers Farmstead Cheese LLC, Waterloo, Chocolate Mascarpone, 99.700.
Second: Amanda Gutzmer, Klondike Cheese Co., Monroe, Odyssey Tomato & Basil Feta, 99.600.
Third: Amanda Gutzmer, Klondike Cheese Co., Monroe, Odyssey Mediterranean Feta, 99.550.
• Flavored Semi-Soft Cheese
First: Lake Country Dairy, Schuman Cheese, Turtle Lake, Garden Tomato Hand Rubbed Fontal, 99.400.
Second: Clock Shadow Creamery, Milwaukee, 99.100.
Third: Crave Brothers Team, Crave Brothers Farmstead Cheese LLC, Waterloo, Marinated Fresh Mozzarella, 98.900.
• Smoked Cheese
First: Roger Krohn, Agropur, Appleton, Smoked Provolone, 99.100.
Second: Jeremy Robinsin, Agropur, Appleton, Smoked Provolone, 98.925.
Third: Pat Doell, Agropur, Appleton, Smoked Provolone, 98.675.
• Flavored Hard Cheese
First: Team Shullsburg-Jerry Soddy & Donovan Taylor, Shullsburg Creamery, Shullsburg, Maple Bacon Cheddar, 99.700.
Second: Diane Klatkiewicz, Sartori Co., Plymouth, Espresso BellaVitano, 99.575.
Third: Jerome Jones, Sartori Co., Plymouth, Merlot BellaVitano, 99.450.
• Smear Ripened Cheese
First: Emmi Roth-Monroe, Emmi Roth, Fitchburg, Roth Grand Cru Original Wheel, 99.150.
Second: Emmi Roth-Monroe, Emmi Roth, Fitchburg, Roth Grand Cru Reserve Wheel, 99.025.
Third: Jon Metzig, Union Star Cheese, Fremont, Soft Washed Rind Cheese, 98.550.
• Cold Pack Cheese, Cheese Food
First: Team Pine River, Pine River Pre-Pack, Newton, Toasted Onion Cold Pack Cheese Spread, 99.950.
Second: Team Pine River, Pine River Pre-Pack, Newton, Garlic & Herb Cold Pack Cheese Food, 99.875.
Third: Team Pine River, Pine River Pre-Pack, Newton, Pepper Jack Cold Pack Cheese Food, 99.850.
• Pasteurized Process Cheese, Cheese Food, Cheese Spread
First: AMPI’s Dinner Bell Creamery, AMPI, Portage, American & Swiss Monterey Jack Cheese with red bell peppers & jalapeno peppers, 98.925.
Second: AMPI’s Dinner Bell Creamery, AMPI, Portage, American Easy Melt Cheese Loaf, 98.875.
Third: AMPI’s Dinner Bell Creamery, AMPI, Portage, American Cheese slice-on-slice, 98.825.
• Reduced Fat or Lite Cheese
First: Anthony Dew, Cedar Grove Cheese, Plain, Reduced Fat Farmers, 98.475.
Second: Steve Webster, Klondike Cheese Co., Monroe, Odyssey Reduced Fat Feta, 98.425.
Third: Ron Buholzer, Klondike Cheese Co., Monroe, Odyssey Reduced Fat Mediterranean Flavored Feta, 98.075.
• Open Class: Soft and Spreadable Cheese
First: Lake Country Dairy, Lake Country Dairy Schuman Cheese, Turtle Lake, Cello Mascarpone, 99.750.
Second: Crave Brothers Team, Crave Brothers Farmstead Cheese LLC, Waterloo, Fresh Mozzarella - A, 99.600.
Third: Brian Crave, Crave Brothers Farmstead Cheese LLC, Waterloo, Mascarpone, 99.500.
• Havarti
First: Decatur Cheesemakers, Decatur Dairy Inc., Brodhead, Havarti, 99.500.
Second: Dave Buholzer, Klondike Cheese Co., Monroe, Buholzer Brothers Havarti, 99.450.
Third: Steve Stettler, Decatur Dairy Inc., Brodhead, Havarti, 99.100.
• Flavored Havarti
First: Luke Buholzer, Klondike Cheese Co., Monroe, Buholzer Brothers Dill Havarti, 99.250.
Second: Team Chalet, Chalet Cheese Co-op, Monroe, Dill Havarti, 98.975.
Third: Matt Henze, Decatur Dairy Inc., Brodhead, Havarti with Dill, 98.925.
• Open Class: Semi-Soft Cheese
First: Roger Krohn, Agropur, Appleton, Provolone, 98.925.
Second: Pat Doell, Agropur, Appleton, Provolone, 98.525.
Third: Lake Country Dairy, Schuman Cheese, Turtle Lake, Low Moisture Fontal, 98.475.
• Open Class: Hard Cheese
First: Aaron Quick, Sartori Company, Plymouth, Asiago, 99.600.
Second: Lake Country Dairy, Schuman Cheese, Turtle Lake, Cello Asiago, 98.850.
Third: Lake Country Dairy, Schuman Cheese, Turtle Lake, Cello Copper Kettle Parmesan, 98.800.
• Flavored Goat Milk Cheese
First: Robert Garves, Mosaic Meadows, Kaukauna, LaClare Chipotle Honey Goat Cheese, 99.700.
Second: Robert Garves, Mosaic Meadows, Kaukauna, LaClare Fig & Honey Goat Cheese, 99.650.
Third: Robert Garves, Mosaic Meadows, Kaukauna, LaClare Blueberry Vanilla Goat Cheese, 98.550.
• Natural Goat Milk Cheese
First: Robert Garves, Mosaic Meadows, Kaukauna, LaClare Creamery Original Goat Cheese, 98.650.
Second: Steve Hurd, Clock Shadow Creamery, Milwaukee, Goat Ricotta, 98.050.
Third: Steve Hurd, Clock Shadow Creamery, Milwaukee, Chevre, 96.750.
• Latin American Cheese
First: Team Browntown, V&V Supremo Foods-Chula Vista Cheese Co., Northbrook, Chihuahua Cheese, 99.225.
Second: Steve Stettler, Decatur Dairy Inc., Brodhead, Asadero, 99.050.
Third: John (Randy) Pitman, Mill Creek Cheese, Arena, Queso Frier, 98.900.
• Sheep & Mixed Milk Cheese
First: Robert Wills, Cedar Grove Cheese, Plain, Donatello, 99.800.
Second: Robert Wills, Cedar Grove Cheese, Plain, Montague, 99.000.
Third: Robert Wills, Cedar Grove Cheese, Plain, Fleance, 98.500.
• Gouda & Edam
First: Ron Bechtolt, Klondike Cheese Co., Monroe, Buholzer Brothers Gouda, 99.025.
Second: Team Roelli, Roelli Cheese Co, Shullsburg, Aged Gouda, 98.725.
Third: Ron Henningfeld, Hill Valley Dairy, East Troy, Whiskey Gouda, 98.675.
• Unflavored Cheese Curds
First: Decatur Cheesemakers, Decatur Dairy Inc., Brodhead, White Curd, 99.800.
Second: Steve Stettler, Decatur Dairy Inc., Brodhead, Muenster Curd, 99.575.
Third: Team Nasonville Dairy, Nasonville Dairy Inc., Marshfield, Cheese Curds, 99.450.
• Flavored Cheese Curds
First: Decatur Cheesemakers, Decatur Dairy Inc., Brodhead, Tomato Bacon Basil White Curd, 99.700.
Second: Matt Henze, Decatur Dairy Inc, Brodhead, Brick Curd With Ranch, 99.650.
Third: Ben Shibler, Ron’s Wisconsin Cheese LLC, Luxemburg, Garlic & Dill Cheese Curds, 99.500
• Salted Butter
First: Cropp Cooperative/Organic Valley, La Farge, 99.000.
Second: Graf Creamery Inc., Bonduel, 98.150.
• Unsalted Butter
First: Cropp Cooperative/Organic Valley, LaFarge, 98.850.
Second: Graf Creamery Inc., Bonduel, 97.350.
• Flavored High Protein Yogurt
First: Klondike Cheese Co., Monroe, Odyssey Vanilla Yogurt, 99.550.
Second: Klondike Cheese Co., Monroe, Odyssey Peach Yogurt, 98.650.
• Unflavored High Protein Yogurt
First: Klondike Cheese, Monroe, Odyssey Traditional Yogurt, 99.600.
Second: Klondike Cheese, Monroe, Odyssey Greek Yogurt, 99.500.
• Open Class: Flavored Yogurt
First: Yodelay Yogurt, Madison, Yodelay Rhubarb Swiss Yogurt, 99.800.
Second: Yodelay Yogurt, Madison, Yodelay Peach-Raspberry Swiss Yogurt, 99.550.
Third: Klondike Cheese Co., Monroe, Odyssey Whole Vanilla Yogurt, 99.300.
• Open Class: Unflavored Yogurt
First: Klondike Cheese Co., Monroe, Odyssey Whole Fat Yogurt, 98.600.
• Drinkable Cultured Products
First: Weber’s Farm Store, Marshfield, Strawberry Low Fat Kefir, 99.800.
Second: Weber’s Farm Store, Marshfield, Raspberry Low Fat Kefir, 98.250.
Third: Weber’s Farm Store, Marshfield, Mango Low Fat Kefir, 97.900.
• Open Class: Flavored Sour Cream
First: Westby Co-op Creamery, Westby, Sour Cream Based French Onion Dip, 99.800.
• Open Class: Unflavored Sour Cream
First: Westby Co-op Creamery, Westby, Sour Cream, 99.650.
Second: Klondike Cheese Co., Monroe, Odyssey Sour Cream, 99.200.
Third: Sigma Darlington, Darlington, Mexican Style Table Cream, 99.100.
• Lowfat Sour Cream
First: Klondike Cheese Co., Monroe, Odyssey Reduced Fat, Greek Tzatziki, 98.500.
Second: Klondike Cheese Co., Monroe, Odyssey Reduced Fat, Greek Sour Cream, 97.900.
Third: Klondike Cheese Co., Monroe, Odyssey Reduced Fat, Greek French Onion Dip, 97.750.
• 2% Fluid Milk: White
First: Weber’s Farm Store, Marshfield, Reduced Fat Milk, 99.800.
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