Forecast Update Live: Dairy Forecast Pressures Build 

Transcript

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00;00;12;02 – 00;00;38;02
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Hello and welcome to Forecast Update Live, a video series from Ever.Ag Insights where each month we gather to discuss our dairy market forecast. I’m your host, John Spencer. We’re joined today by Kathleen Wolfley, Melissa Bischoff, and Phil Plourd to get us started. Kathleen, please run through the highlights of this month’s forecast compared to last month’s. Thanks, John.

00;00;38;06 – 00;01;09;07
Unknown
Some pretty notable changes to the forecast from June to July, primarily on the back side of the nonfat market, coming down pretty substantially. We’re expecting to see about a 38-cent reduction in our forecast for the second half of 2026, as we have seen, that that nonfat market come down, notably, the cheese market and the butter market will see some modest declines in the second half compared to our June forecast and no major changes to whey.

00;01;09;08 – 00;01;31;24
Unknown
Okay. Well, each month we also ask our panelists to take on the bull side of the story or the bear side this month. Kathleen, you’ve agreed to take the bull side of the story, take it away and let us know what you’re seeing out there. Well, John, it is June 29th as we’re recording. And to kick off our discussion today, before we hit record, we were talking about summer heat.

00;01;31;25 – 00;01;50;10
Unknown
It’s hot in Chicago. It’s hot in Madison. Melissa, we didn’t get the temperature in Denver. It’s hot in Western New York. So I think that it’s about time that we start thinking about heat stress, not just in the US, but across the rest of the world as well. There’s a lot to talk about it being super hot in France.

00;01;50;10 – 00;02;13;28
Unknown
I went and just did a quick little calculation of Celsius to Fahrenheit, and I think it’s in that 85 ish degrees mark in France. I’m hearing that the UK is warm. It’s just warm across Europe. So as we think about those major milk producing regions in the US, in the EU, I think they’re always a risk that we could see a little less milk out of those two major milk producers.

00;02;13;29 – 00;02;38;26
Unknown
On the backside of this heat stress, there’s always chatter that it’s not just the first heat stress event, it’s the third, the fourth that really starts to knock cows back. But I think it’s something that we should be mindful of as milk production has been flowing at a steady pace here for the last several months, and any major blip in milk output could start to tighten things up, especially from a cheese perspective.

00;02;38;26 – 00;03;11;14
Unknown
When we’re trading $2.30 block cheese at the exchange. Okay, great. Thank you. Kathleen. Melissa, you’ve agreed to take the bear side of the story this month. Take it away and let us know what you’re seeing out there. Sure. I would say demand feels on the bear side for the bear side, the foot traffic at QSRs and restaurants has been trending below year-ago levels for many weeks here now, and it’s just feeling like a soft domestic demand picture.

00;03;11;14 – 00;03;42;00
Unknown
Overall retail butter has seen a little bit of uptick. But generally we’ve seen you know flat to declining on retail cheese and fluid milk. I think we’re very dependent on exports to move product with that weaker demand. And we’ve also seen some international prices move a little bit lower here lately as well. Putting that pressure on domestic products, maybe pushing prices even lower to find those exports.

00;03;42;02 – 00;04;01;21
Unknown
Okay. Thank you panelists. Okay. Thank you. Kathleen and Melissa. Every month we ask Phil to do what we call his Favorite Look. It’s always one of my favorite slides of the whole month. So Phil, I’m excited to see what you brought this month. Take it away. Yeah. Thanks, John. Playing off what Melissa was talking about on soft domestic demand.

00;04;01;22 – 00;04;26;03
Unknown
You know, we’ve talked about, you know, high gasoline prices and stretched consumer budgets. We’ve talked about the restaurant situation. We’ve not seen a lot of promotional activity at retail around cheese. So there’s a variety of GLP-1s. There’s a whole variety of reasons why we think that cheese demand may be softer and food demand may be soft generally, but I think you add SNAP to the list.

00;04;26;03 – 00;04;59;27
Unknown
So over the past year, we’ve seen a tightening of eligibility requirements around the Supplemental Nutrition Assistance Program SNAP. We’ve seen increased fraud prevention measures. And after a four month hiatus, USDA finally published the latest data around SNAP. And in March, it showed 20.3 million households enrolled in the program, and that was down 10% versus year prior levels. And you know, the benefit the average benefit hasn’t really changed much.

00;04;59;27 – 00;05;32;25
Unknown
Is $347.10, down 1% from a year ago. So this is not about smaller checks. It’s about fewer checks. And when you look at what that adds up to the benefit cost differential last year versus this year was $880 million. So it’s almost $1 billion less flowing into grocery stores through this program. And so it’s pretty remarkable downtick. And, you know, at various times in the past couple of years, we’ve seen different events that have altered the SNAP benefits.

00;05;32;25 – 00;05;55;05
Unknown
And we hear the CPG companies and the retailers talking about it. And I think we’re going to hear more about it in the months ahead. Because when you look at SNAP benefit costs as a percentage of grocery revenue, it was 8.3% this March, compared to 9.4% last March, the smallest share since 2020. So our Favorite Look looks at the number of households enrolled.

00;05;55;05 – 00;06;17;17
Unknown
And I think it’s a pretty big story, and it’s a little bit off the radar when you’re talking about why is demand sort of squishy across the board? This is one reason. Okay, Phil, that’s broad grocery sales. What about dairy? Do you have a sense of how much dairy moves through SNAP channels? It’s sort of a state secret, you know, the breakdown of spending and SNAP.

00;06;17;18 – 00;06;40;07
Unknown
I mean, it’s not something that’s published widely, but, you know, when you look at basic core products like milk and certain types of cheese, it’s a it’s a pretty decent portion of the SNAP basket. It’s typically ascribed to dairy. So we can say that the reduction in SNAP dollars may be having an outsized impact on dairy versus other products.

00;06;40;09 – 00;07;08;08
Unknown
Yeah, I would say it’s one of the top things on the list. So bringing in a slide from Christmas past, if you will, not that long ago. You’ve you’ve done some really incredible work on GLP-1. And it feels like that has been a hit at the broader demand level for food as well. So here is GLP-1 and possibly a hit from SNAP benefits at the grocery store level.

00;07;08;08 – 00;07;28;08
Unknown
It just feels like food in general at retail has some headwinds against it right now. Yeah, and GLP-1s have produced some dairy winners. I mean, the way protein craze is certainly in part fueled by GLP-1. But yeah, I’m not convinced that cheese is a winner in the whole GLP one constellation. It’s neutral to maybe slightly negative, and as best I can tell.

00;07;28;13 – 00;07;57;22
Unknown
Great. Well okay. Again thank you Phil. Always appreciate your unique perspective. 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 AG 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 via email at [email protected]

00;07;57;24 – 00;08;09;20
Unknown
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