The Perfect Storm for Milk Solids

Milk already feels tight across much of the U.S.

That could be the setup for a perfect storm.

Summer heat, warm nights, wildfire smoke and plant disruptions have pressured milk production and moved milk into unexpected places. Now, Class I bottlers are preparing for schools to reopen just as cheese plants, protein beverage manufacturers and other processors compete for the same milk solids.

In this episode of The Milk Check, guest host Josh White and the Jacoby team break down what could make August, September and October especially interesting for dairy markets.

We cover:

How heat, smoke and limited nighttime cooling affected milk production

Why school bottling demand could tighten the market further

How the cybersecurity disruption temporarily increased condensed skim availability

How conflict, Red Sea risk and higher freight costs are complicating dairy exports

The dairy market is not moving in a straight line. But competition for milk solids is building, and the next few months could determine which product sectors get the milk they need.

Listen to The Milk Check episode 103: The Perfect Storm for Milk Solids.

Also available on: Amazon Music, Apple Podcasts, Spotify, and YouTube.

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Ask The Milk Check

Transcript:

[Opening commercial]

Josh White: [00:00:00] Coming up on the Milk Check.

Jennifer S. Kuo: The Red Sea seems to be an issue now as well.

Tyler Jokerst: Yeah. Josh, if the Houthis are getting involved, when you’re looking at Yemen that’s a direct effect on the Red Sea, which is the other half of that peninsula . And then it starts to limit the only access point that you can have into the Red Sea being through the Suez Canal.

Josh White: ​In absence of our fearless leader, Ted we invite our audience to join us for one of our bi-weekly commercial meetings, where our group gets together and breaks down the market based on our individual disciplines.

Today’s group is a fairly large one but we have members representing our fluid team, our ultrafiltered and cream team, cheese, butterfat, milk powder, and whey, which makes up our trading group.

We’re in the dog days of summer right now, schools are out, families are traveling. There’s people out of the office not making decisions. That’s happening both in the U.S. and in Europe. Let’s touch on current market, climate, what we’re experiencing, and then what we’re paying attention to or looking out for in 30 days time. Let’s start with where we’re at on the milk side of things. Greg, both you and Jared, have experienced a little turbulence over the past week or so with some milk movements.

We’re just coming out of a big heat stretch. We’re on the cusp of the South starting to refill its bottling pipelines. What are you feeling and seeing right now, Greg?

Greg Scheer: We’ve had some plant closures that have pushed milk around the Mideast, the Northeast, and, around the country.

We have had a week or two of that. The first heat wave, back several weeks ago, hit the cows harder than expected, and I’m wondering if maybe that’s the age of the herd is a little older that maybe it hit them a little more.

Usually, you have a heat wave, the cows recover some. Normal summer, they get another heat wave, and then, it hits them a little harder the second time or third time. Seems like the first heat wave hit the cows a little harder. I think production’s down just a little bit more than we expected or earlier than maybe a normal summer.

Other than plant problems that push milk around, it feels tight. We get to next month, schools start up again or are about to, and bottlers start putting milk into the bottle for schools, then it’s gonna get really tight and could be tight through September, October when maybe production comes back a little bit and the pipeline gets filled, and then it levels off demand a little bit.

It feels tight other than plant closures. It’s gonna get re