The Milk Check

Episod

• 
  Can the U.S. Keep Its Dairy Export Advantage? 05.08.2026 42min

  We’re excited to have Will Loux, senior vice president of global economic affairs for the U.S. Dairy Export Council, join us to share his presentation of the future of U.S. dairy exports. For years, the U.S. dairy export portfolio has leaned heavily on nonfat dry milk, skim milk powder, lactose and lower-protein whey products. But our exports are changing. In the latest episode of The Milk Check, host Ted Jacoby sits down with Will Loux to break down the changing U.S. export picture. In this episode, we cover: Why U.S. dairy exports are moving toward cheese, fats and higher-value proteins How domestic protein demand is pulling skim solids away from dryers Why more cheese may be produced partly to create additional whey protein How exports are absorbing a larger share of new U.S. cheese production Where Latin America offers room for additional cheese growth What it will take for U.S. butter exports to become more consistent and profitable The U.S. has the milk. It has new processing capacity. And it is capturing a growing share of international cheese demand. But growth creates new challenges. Are you ready to meet them? Listen to The Milk Check episode 104: Can the U.S. Keep Its Dairy Export Advantage? Also available on: Amazon Music, Apple Podcasts, Spotify, and YouTube. Got questions? We’d love to hear them. Submit below, and we might answer it on the show. Ask The Milk Check Transcript: Ted Jacoby III: [00:00:00] Coming up on the Milk Check. Will Loux: What I’ve heard from folks in Europe and elsewhere is how do they manage the U.S. tsunami of exports that’s coming? And I think that, at the Export Council, it makes me excited, but it does mean we need to keep our strategies current. Ted Jacoby III: Welcome to the Milk Check from T.C. Jacoby & Co., your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I’m Ted Jacoby. Let’s dive in. Ted Jacoby III: Today, we are very excited to have Will Loux, Senior Vice President of Global Economic Affairs for the U.S. Dairy Export Council joining us.  A few weeks ago I saw a presentation that Will gave that talked about where the U.S. dairy industry is going, especially from an international perspective. It was an absolutely fantastic presentation, and I couldn’t help but think that just this presentation alone would be an absolutely fantastic topic for our podcast.  I have a bunch of our traders joining us, many of our usual suspects, including: Ted Jacoby III: Diego Carvallo, Joe Maixner, Miguel Aragon, Mike Brown, all from our trading team. Guys, thanks for joining us. Will, thank you so much for joining us. It’s great to see you again. Will Loux: Good to see you, Ted. Thanks for having me on. Ted Jacoby III: Excited to have all of our listeners listen to this. Will, the floor is yours. Will Loux: Perfect. Well, thank you for having me, Ted, and glad to have so many people on here and another audience for this presentation. I’ve got some slides. For those of you like me who will listen to this podcast usually while driving, feel free to go check it out on YouTube. I am also gonna do my best to reference what is in those slides as best I can remember to do so. But what is the future of U.S. dairy exports? What we’ve seen, really over the last twenty-five years, has been this tremendous, consistent growth, in aggregate U.S. dairy exports. We just got May data, and what we saw was on an annualized basis over the last twelve months, the U.S. actually set a new record again. So our exports have never been higher than they are today. But that said, our exports look fundamentally different than what they did 20 years ago. Before, when we were getting started with exports, 75, 80% of our exports were really driven by nonfat dry milk, and low-protein whey products, and lactose. That’s been the vast majority of our portfolio for much of this time, and we’ve had a few different eras where we’ve seen U.S. cheese exports picked up, especially around 2014 when the world was short of milk and we saw U.S. cheese and butter go overseas. But then we saw that stagnate for a few years. Now, what we’ve seen since COVID has been this tremendous growth of these more value-add products, these specialty products. I believe the U.S. is moving towards a portfolio in the export market that looks a lot like cheese, fats, and proteins. And that’s gonna be the core of our exports, I think, going forward because the U.S. dairy industry is really kind of, I consider it an evolution rather than, like, a true revolution. But this is one of those facets that I think is really interesting to see is the U.S. has consistently been growing its exports, unlike a [00:03:00] lot of other supply origins. But this is one that I think as we go forward I’m really excited about. But it’s gonna change how we need to think about exports over the next few years. Ted Jacoby III: Will, it sounds like what you’re saying is not only are we seeing the total volume of exports go up, but the dollar per pound value is even going up faster because we’re switching away from that low-cost carb portfolio to a much higher-value protein, fat, et cetera portfolio. Fair to say? Will Loux: I think that’s exactly right. I think there are implications for that, too.  That if the U.S. is moving out of perhaps exporting as much skim milk powder or sweet whey because we’re instead making UF milk or cottage cheese or yogurt or high-protein whey, well, there’s still demand overseas for that sweet whey and for that skim milk powder. But now, it’s actually getting supplied by a few other countries, too. So, we do have to keep all of these things in mind. But to me, I think we’re moving up the value chain as the U.S., and what I’ve heard from folks in Europe and elsewhere is how do they manage the U.S. tsunami of exports that’s coming? And I think that, at the Export Council, it makes me excited, but it does mean we need to keep our strategies current with where we’re gonna go in the future. One of the things that I’ve noticed here over the last really few months but even going back to last year has been a real shift in how the U.S. dairy market is balancing itself. I would argue that for the last really 20 years, to be frank, but at least for the last 15 years, the U.S. dairy market has largely been balanced to domestic fat demand. Yes, we did see, certainly, exports of cheese grow over this time, so I don’t want to discount that as a butterfat-heavy product, but for the most part, what we’ve seen has been the U.S. has consistently balanced with where domestic demand for butterfat has grown, and then we’ve exported the skim solids largely in the form of nonfat dry milk and sweet whey overseas. What we’ve seen here over the last several years has been the U.S. switching from a traditionally balancing to domestic milkfat demand, where we’ve seen butter consumption grow, whole milk consumption grow. U.S. milk production, U.S. dairy production grew with that. And then, we exported the additional skim solids in the form of nonfat dry milk, sweet whey, high protein whey, lactose. Those products were the ones that we were really exporting. Now, what I think is happening is the U.S. is no longer really balancing to fat anymore. We’re in this precarious balance right now. We’re not quite balanced to protein yet, and we’re not quite balanced to the beef market yet because we still have high prices for protein. We don’t have enough of it to go around. We don’t have enough beef for the beef market to go around, but we also have more milk fat than the domestic market can consume. And so we’ve seen these exports really rise. So, I think what we’re seeing right now is the U.S. being pulled in different directions, and the U.S. exports as we go forward here over the next few years is in some ways at a crossroad as to which of these routes do we go. Do we swing back to balancing to milk fat, which would mean we’re probably short of protein, or do we start balancing more to protein, which means we’re gonna need to find homes for a heck of a lot more cheese and butter in the next few years. [00:06:00] Because to me, at least, if you look at the beef market, from a dairy farmer’s perspective, you are still seeing that incentive to add additional cows just based on the returns on the beef side of things. And because of that incentive to hold the dairy cows longer to get the additional black calf, also with that breeding the best of the best in the young stock, we are just seeing the largest milking herd since the 1990s and the lowest replacement herd since the 1970s. And everything we’re seeing on the beef cattle side of things would suggest this isn’t slowing down anytime soon. But from the U.S. perspective, I think what this means is we’re gonna continue to see more milking cows around, and those cows are getting more productive than ever before. And even as we’re seeing this surge in milk production, I think on a component basis, last year in in 2025 we were up 3.8%. This year we’re up not quite at 3%, but still pretty darn close. Even as we see this growth of milk, these additional black calves coming on the market, we actually still don’t see enough protein hitting the dairy markets right now. And so, what we’re seeing is even as we see this huge surge in cottage cheese production and yogurt production, my personal opinion is yogurt doesn’t get enough credit for this protein rally. It’s like 10X the volume of cottage cheese, but what we’re seeing right now is this pull of protein. I think this pull of protein is predominantly domestic. We’re seeing UF beverages, we’re seeing yogurts, we’re seeing cottage cheese, we’re seeing everything that whey protein can go into from cereals to snacks to beverages. All of that protein pull is basically sucking protein and skim solids that had been going to the export market back into the U.S. By virtue of that, we’re also seeing U.S. cheese production need to increase, not so much for the cheese demand that we’re seeing here in the United States, but rather for the whey demand that we’re seeing here as well. The cheese has really become that co-product of the whey stream. I think even conversations that I’ve had with U.S. manufacturers of, “How can I get more whey protein without building a new cheese plant” is part of the consideration. One of the things that we’ve looked at over this time has really been where is this protein in the United States going? Because we’ve seen U.S. milk production rise, U.S. milk protein production rise in the sense of protein out of the cow, but we still have less nonfat dry milk and skim milk powder than we had a year ago. What I’ve noticed over this time has been certainly the cheese vat continues to get first dibs on most of that protein. Even in the May data that we got out of USDA, you saw cheese production was up, even when nonfat dry milk was sitting at sky-high levels north of $2.00. What we’re really seeing right now is we’re pulling milk out of the dryers and either putting it into the cheese vat or putting it into these other high-protein products and the like. What that is doing is that’s shifting our export mix. So far this year, our exports of skim milk powder, amazingly, are flat somehow. But if [00:09:00] you look at our May exports of nonfat dry milk and skim milk powder, they were down 20%, and I think that’s reflective of that, and we were down last year. What we’re seeing has been the U.S. is moving out of some of these carb-heavy, as you talked about, Ted, to these more higher value uses for these products. And even nonfat dry milk production picked up in May, but it’s not that we pulled milk out of the yogurts or out of the cottage cheese or out of the natural cheese itself, it’s that we stopped making skim milk powder and instead made nonfat dry milk. This is really where we’re seeing this pull of protein, either in the form of beef necessitating more cows or necessitating more capacity to make whey proteins, milk proteins, UF products, or just high-protein dairy products. All of that pulled together is sending a, “Let’s go make more milk.” Contrasting that, you have cheese and fats, which at this point right now, and historically this isn’t too unusual, but it is something different than we’ve really seen over the last few years, has been this export push of cheese and dairy fats in the form of predominantly butter, AMF, and to a lesser extent whole milk powder. What we’re seeing here has really been this shift where right now I think we’re growing our milk production as fast as the international market can absorb our cheese and fats. Because if you look here, since COVID, what we’ve seen is about 36%, over a third of the new cheese that’s been manufactured in the United States, has gone to export. If you think about that historically, about 5% of the new cheese in the previous decade went to exports. And now we’re at 35%. And if you look at the last two years, it’s north of 65% has gone to exports. As we’re building these new cheese plants, in part for the whey, there is that eye towards, “Okay, where are we going with this cheese?” And it’s gotta be overseas. Within that, too, the United States is actually the one capturing what is a growing global market. It’s not just that the U.S. is flooding the market with less expensive cheese, it’s that global cheese demand is growing, and the U.S. is the one capturing that. Because if you look, since COVID, the U.S. has captured about 60% of that new cheese demand that’s happening overseas, and that’s really been coming from the United States. Europe’s grown their cheese exports too, so has New Zealand. Australia’s basically flat, but the rest of the world evens up. The difference here is that the United States is really the one capturing this demand growth because we have the milk, we have the cheese, and that’s really where I think the U.S. has managed to expand its footprint, be a more consistent exporter, and really break into new markets that it hasn’t before. But we’ve been in cheese for a while. Granted, it’s at a different scale today than what it has been. We were up 20% last year in cheese exports. This year we’re up about 25% so far this year. We continue to surge in our cheese exports. The difference that is new this time around is, fundamentally, that we’re seeing this expansion come not [00:12:00] just in cheese as our primary vehicle to export the fat and casein, but also in fat-heavy products, predominantly butter, but also AMF and whole milk powder, too. That you’re seeing the United States now, for every, load of high-protein beverages, you’re gonna have a load of cream that you’re gonna need to deal with, or multiple loads of cream that you’re gonna have to deal with, and that’s now going overseas. Domestic demand for butter is still going strong. Domestic demand for whole milk continues to grow. The difference is we’ve just grown production faster than that domestic demand. And so, you pull this all together, and I really think we’re seeing an evolution in our portfolio for exports. Cheese by value is now our biggest export product, and you’ve seen fats and proteins continue to grow within that portfolio, as well, from a value perspective. While we’ve seen nonfat dry milk, low protein whey, lactose, those have really been flat to declining over this timeframe. And so, if you look at that incremental growth that we’ve seen in our U.S. dairy exports since COVID, again, what we’ve seen is our two biggest stars during this period have been cheese and fats, and I think protein in the long run is still really optimistic to me. But you pull this all together, the U.S. is still gonna be a major player in skim milk powder, sweet whey, whey permeate, lactose. But if you look at where our exports are gonna grow in the future, those are really some of the key products. What do you all think about this as kind of a argument here for where our U.S. dairy exports are going? Joe Maixner: That’s been exactly what we’ve been discussing for the past six plus months, that our supply is going to continue to outpace the domestic demand. So 100% agree with everything you said in this, Will. I think that butter will continue to become a major player in the export market. Miguel Aragón: In my case, being out there in the trenches, I see this day in, day out. The penetration of U.S. cheese and butter, especially right now. We know the soaring ingredients, but cheese and butter especially, every day you could see it more and more in the marketplace. Something really interesting that you said at the beginning: If we’re gonna produce more cheese, we’re gonna have to find a place for it. We know the numbers, we see the numbers. It’s an amazing story. But right now, as we speak, that is replicating in Central America. You guys see it at the U.S. DEC. And I just came back from Colombia. The opportunity is there for us, as long as we keep doing what we’re doing now and looking at the market, adapting to the market, adapting to what the market is asking us for, and also replacing some of the product that is coming from Europe and New Zealand. But I agree with what you’re saying here 100%. Ted Jacoby III: Will, I’m gonna turn the question around on you a little bit. Is the global demand for butterfat there for us to continue to increase how much butter we’re exporting? And is the global demand for cheese there? Will that global demand keep increasing for those two products? Will Loux: From my perspective, it’s yes. What I find interesting over the last couple years has been that [00:15:00] cheese demand held up exceptionally well even during high inflation periods. Where we saw other dairy products actually feel a lot of the pressure internationally, cheese demand kept growing pretty much right on track. What we’ve seen here on the cheese side over the last couple of years internationally has been this acceleration in cheese demand, and I think some of that has to do with, as Miguel was saying, tremendous growth from our partners in Latin America. That’s been a key engine for U.S. dairy exports here over the last couple of years and, frankly, since the Export Council was founded about 30 years ago. But when we look at the opportunities abroad, I think that we still have a lot of untapped potential on the cheese side. I remain pretty optimistic about that. The other thing I’ll say, too, here is: I don’t think European milk production’s gonna keep growing at 3% a year. I don’t think you’re seeing the same investment in new cheese capacity. I think we’re seeing investment in Europe and New Zealand in new protein capacity, and that’s maybe another conversation. But I think the U.S., one, has the opportunity to capture what is a growing global market on the cheese side, and also capture market share on the cheese side. The butter standpoint has been interesting. Butter has typically been, internationally, one of the more price-elastic products. It’s one that we’ve seen when butter prices really skyrocketed, some of that may be allocation, but when butter prices were high, we did see international demand struggle. Conversely, when butter prices were low, like they are today in many ways, we’ve seen butter demand grow. And butter demand internationally is growing, not just out of the U.S., but globally. I think the question I have here with butter is less about can the U.S. compete in this market, but more, what is our price point relative to Europe and New Zealand. Because I think if you look at our butter exports, for much of last year we were probably a buck a pound below Europe. A lot of that butter was going into Europe, where coincidentally the tariff into Europe is about a buck a pound. I think my question is more crucially than can the U.S. capture growing demand for butter, it’s where do we grow our butter exports. And I, personally, think the U.S. should never be exporting really butter to Europe unless we get additional market access. I think the U.S. should be exporting butter to its higher value markets and partners, places like Mexico, like Central America, North Asia and Korea, Australia, the Middle East, assuming we can keep the strait open for a little while. But I still remain pretty optimistic that the U.S. can keep growing in those products. Some of it will be market share, and some of it will be new demand, particularly on the cheese side. Ted Jacoby III: Will, looking at this graph where it’s talking about, U.S. dairy exports by destination, there’s a big increase into Latin America since 2021. Will Loux: Yep. Ted Jacoby III: Is that fair to say most of that is cheese? Will Loux: It’s fair to say most of it is cheese. We have seen increases also in nonfat dry milk and skim milk powder exports to Latin America over this timeframe, too, but the big driver, I think especially post-COVID in Latin America, was, [00:18:00] one, that region was the first major region, I should say, where tourism increased to levels higher than what it was before COVID, and we continue to see pretty good economic performance in the region. The other thing I don’t wanna discount here, too, has also been the full implementation of CAFTA-DR, our trade agreement with many of the Central American countries came into full effect, and you’ve seen this real surge in demand from the region and collaboration with our local partners there, that we’ve really seen this growth in Central American demand and Caribbean demand. Most of that is cheese. More recently, there are also butter and AMF and so going there too, but cheese has been the engine on the Latin American side most recently. Mike Brown: Will, I’ve got a question. Anything in particular we in the dairy industry, and of course you at U.S. DEC, are watching as far as improving opportunities, but also possible disadvantages we may gain through trade. Will Loux: Yeah. Great question, Mike. I have a mix of optimism, and then probably a couple notes of caution on this. So from my optimistic take, a lot of these new agreements on reciprocal trade that we’ve signed with key partners around the world, some of these are incredibly exciting because these are markets we’ve wanted to have agreements with for a long time. In particular, Indonesia makes me very excited. I think if we are able to see that actually be implemented here soon, I would be even more excited. I think there’s still a question on when that gets fully implemented. Taiwan is another one. We are getting access into markets that we never had access to before. We’ll see when those are fully implemented but again, I am still pretty optimistic on where those have opportunities for the U.S. to build upon and get on an equal footing with our competitors in Oceania and in Europe. However, our competitors are not staying static. We see a new agreement here between the European Union and Mexico. We have an agreement between the European Union and Mercosur that gets them additional access, particularly in proteins. I think the U.S. cannot take its customers for granted. Especially as we look at places like Mexico, that’s one where competition is not going to go away. And when we’ve seen nonfat dry milk sit 75 cents plus above Europe, you’re gonna see customers start calling Europe and New Zealand and looking for alternative sources. Or when we have high-protein whey products that are in such demand domestically, are we making sure we’re contacting our customers abroad? Because what we’re seeing now is Europe is heavily investing in additional whey protein capacity. Even as the U.S. is the largest exporter of high-protein whey in the world, I think there are other origins that are coming for that. And so, when I look optimistically, it’s like, “Great, we get more market access.” But to some of the key questions that I have around like is the U.S. ready for the future of dairy exports, one of them is gonna be: How do we actually meet this international demand on the protein side, and are we gonna have the market access that we need to be able [00:21:00] to capture sales? As I look at the world market today, I have a ton of optimism for where the U.S. can really be the supplier of choice, but it’s not gonna be a straight line from here to there, even on the fats or even on the cheese. I think the last couple years, milk production’s been up so much, it’s allowed us to capture a lot of demand, but even those I think will bounce around. Mike, I don’t know if that answered your question, but that was where my head’s at these days. Ted Jacoby III: Everybody, we will be right back after these messages. Diego Carvallo: I’m Diego Carballo with T.C. Jacoby & Co.. T.C. Jacoby & Co. specializes in international dairy markets. For new customers that haven’t done business with Jacoby, I would tell them that we can provide them with many of the powders, dairy products that they consume, not only with the physical product, but we can also help them mitigate their risk. We know dairy. We know the main players. We know the main providers for the whole value chain. We are one of the strongest players in the U.S. market because we have contact all the way from the farmer moving the liquid milk all the way to the end users that buy the end products. I am Diego Carballo with T.C. Jacoby & Co., and we bring dairy to the world. Will Loux: Ted, maybe what do you think if we go through a couple of these questions and have a little debate? Ted Jacoby III: All right. We’ll ask our team. Number one, does the U.S. have the necessary market access and global reach to capture sales opportunities in a multipolar world? Will Loux: And maybe I’ll clarify what I mean by multi-polar world. Ted Jacoby III: Great idea. Will Loux: Cause what I mean by that is if you look at global dairy trade leading up to COVID especially, from 2010 to 2020, China was the engine of that global dairy import demand growth. They accounted for 40% of that growth. These days, I’m not particularly optimistic China’s gonna be the engine. I think China will be an important import market, for sure. And I think they’re still gonna need fats, they’re still gonna need proteins, but they’re growing their own domestic supply, particularly of commodities. So, what I think the future looks like from a demand perspective is collective growth. Latin America, Southeast Asia, Middle East, North Africa, Sub-Saharan Africa even, I think there will be a lot of countries growing that collectively equal what China was doing before. But we’re gonna have to play in a lot of markets. So, the question to you guys then is: Do we have the reach and access to be able to compete in a lot of different places, or what does that look like for the U.S.? Because China is not gonna be the engine of global dairy demand here over the next decade, we’re gonna have to compete in a lot of different markets. In the previous decade leading up to COVID, you saw a lot of the New Zealand milk production, an increasing percentage was going to China, which opened up opportunities for us in Southeast Asia and the Middle East and others.  As we look at this next era of dairy exports, do we have the market access? Do we have the global reach and infrastructure to be able to capture sales in a lot of different markets [00:24:00] around the world? Diego Carvallo: That’s a good question. If we start with the premise that the U.S. is not gonna desperately need to export nonfat, I would say that it’s not gonna be that difficult to find new markets. The U.S. is not gonna have to fight to move additional volumes like they need to do for products like butter. Where do we take the skim milk powder that we’re currently making if China is not a huge buyer anymore? There’s plenty of demand still to be covered in other regions of Southeast Asia in other regions in Latin America, where we should have a good footprint and where we should have some advantages when it comes to freight. I would say the main markets where we have to gain market share are gonna be definitely Central America, the Caribbean and Latin America because of all of the advantages when it comes to freight and the relationship and other factors. The market where we’re gonna fight with the rest of the origins is gonna be Southeast Asia, we may need to go there and fight with price, with aggressive pricing, and we may need to compete even with China, ’cause we’re hearing that even China has been exporting product to that region in the past year. There’s gonna be some markets where we are positioned to gain market share and others where we’re gonna have to compete in price. Ted Jacoby III: Miguel, what do you think? With cheese and butter, do we have the necessary market access and global reach? Miguel Aragón: We do have the necessary market access. Our products are welcome where we are taking them. Our issue is more like, the cheeses that we produce at scale, cheddar and color cheddar, are not necessarily the cheeses that our markets are asking for. We need Gouda, we need Monterey Jack, we need Sadero, we need Manchego. We need the help of our partners, our plant partners, to adapt and to see the opportunity of the cheeses that those markets ask for. And I’m in particular about Latin America. But then again, that’s a big market.  U.S. cheeses are well-received. We do have places to go with it. We just have to get better at exporting. U.S. DEC does a really good job at helping us get into those markets, vet the customers and teach about the products. We are doing the right things. We just need to do it a little bit better. We do have places to go with that extra cheese. Ted Jacoby III: Miguel, do you think there’s a lot of underserved regions in Central and South America? In other words, are there a lot of customers who the only reason they’re not buying and importing more U.S. cheese is because they don’t know who to buy it from, they don’t have the contacts? Miguel Aragón: I do. In the last trips that I made, especially to the northern part of South America, colombia, Peru, Ecuador, there is demand. It just reminds me of Mexico 15, 20 years ago. They don’t know who to buy it from. They don’t know that we make it. They don’t know that we have the variety that we have. It’s an education. We have to work, harder at marketing our products down there. But there is a place. There is definitely a place. There is a market. Ted Jacoby III: Thanks, Miguel. All right, Joe, I got a question for you. Can the U.S. export butterfat products consistently and in a [00:27:00] profitable manner? Joe Maixner: I think we’ve started showing that we can export consistently. Numbers have been pretty consistent and have been growing throughout the year. A profitable portion probably remains to be seen. We’ll always have to be aggressive as we’re entering into new markets ‘ cause we’re gonna have to find a way to penetrate into markets that have been historically dominated by Europe or Oceania with a product that does not look like Europe or Oceania’s product. The easiest way to do that, obviously, is to, for lack of a better term, buy our way into the market to people to try the product. But once our product is in there and they realize it’s a consistent quality butter, I think that we certainly have the opportunity to be profitable long-term. Realistically, exporting butterfat consistently makes everybody more profitable in the U.S. because it pushes fat offshore, which helps our butter price, ultimately, domestically. Will Loux: When I look at exporting butterfat profitably, for us, especially at the Export Council, it’s been one of those things that the U.S. for the longest time hasn’t had butter basically to export. When we’ve gotten long, we’ve found places to clear it. I think what’s changed this time around has been that it seems like with the pull of protein, that we’re gonna have at least some butter available long-term. The question that I still have is where are the best places for us to invest? And even as an Export Council, where are the best places for us to invest our resources into trying to make sure that customers even know that the U.S. has butter available to export, while also trying to find ways of helping U.S. exporters navigate different tariffs than they’ve traditionally had to export, making sure the product specs meet it, and then also trying to get new market access in places that, for a while we’ve seen a lot of trade agreements that thankfully got the U.S. access in cheese and in milk powders, and sometimes butter was in there, sometimes it wasn’t. And so how do we get additional access into that? I look at the U.S.-Japan phase one, that we got additional cheese access, I think we could use some additional butter access into Japan. I’m pretty optimistic on this one. I don’t know if we’re there yet, but I think it’s gonna be isolating which markets are going to be the most profitable for us. I’m probably less optimistic that we’re gonna be consistent in exporting butter here in the next couple of years. But long-term, I think it’s undeniable that the U.S. is gonna have to go in this direction eventually. Ted Jacoby III: Why are you less optimistic in the short-term? Will Loux: I’m a little optimistic in the short-term because we have been exporting effectively double the butter exports we have been. We’ve seen that gap between the U.S. and international markets close quite a bit. Inventories are pretty low. The milk fat test, until May, which surprised me a little bit, had been slowing down as farmers adjusted rations. If we get to the point where butter is $1.40, $1.50, I’m not sure it always makes sense for the farmers to pay for the incremental increase in feed inputs to boost the butterfat test to the [00:30:00] extent that would boost our exports. We may find ourselves tighter in butter in the fourth quarter because we’ve exported our way back to balance. And to me, it looks like where cheese was 15 years ago: That we are on the path towards being a consistent exporter, but we’re often still going to prioritize our domestic market. From the U.S. perspective, I think our butter looks like cheese did 15 years ago, where we’re often export competitive, but not always. Joe Maixner: Will, basically, you have summed up exactly what I’ve been saying for a while, where the butter export opportunity will be cyclical because we will get super competitive, which will drive our domestic price up, which will take us out of the market, and then in turn, cause a surplus of domestic butter to show up in the market, which will then collapse the price and make us super competitive again in the export market. We’re still early enough in the phase that we’re trying to figure out those cycles. I do think it’s cyclical. Overall, though, I do think we will be a consistent exporter. There’ll be a base, and it will ebb and flow, but I do think we will be a consistent exporter moving forward because as we’ve gained market share, we are getting loyal end-use customers in export markets that will consistently pay for our product. Will Loux: I 100% agree with that. I think it’s gonna be, where do we keep our consistent customers, and where are the opportunistic sales that maybe ebb and flow? That’s gonna be a multi-year process as that all shakes out as to where are our stickiest markets within all this? Mike Brown: You want those consistent customers. Jacoby, one of our jobs is helping people with those opportunities. So, they’re both important, but you still need that core base demand and respect for the product. And so, I have a question for you on this, Will. Let’s take butter. Butter’s a great example because the world is unsalted 82, we’re salted 80. I think Joe would attest: We’re seeing suppliers trying to be more flexible in making the product that meets that demand, yet on the other hand, if you’re gonna store a commodity, you gotta make the commodity that is the market product. What are you seeing as far as our adaptability to be that flexible supplier in the world market? What else do we need to do that maybe we aren’t currently doing? Will Loux: There certainly has been a lot of progress made. From my perspective, you have a few different things. One is, of course, the salted and the fat content in the U.S. is different. It’s rare that we’re gonna be exporting from our inventories of 80 salted unless it’s just purely a price play. But what I think about when I think long-term export opportunities is really targeting the key channels that the U.S. is likely to win in first. And some of that’s food manufacturing. I think that’s where the U.S. can be really good, especially making bulk butter for export. I think it’s the first channel. But then it’s also making sure our formats meet the expectations of the customers. Because food manufacturing, I think, will only get us so far. The next phase where the U.S. can really excel in a couple markets is in the foodservice space and in the bakery space, in particular. We have next to no [00:33:00] capacity in the U.S. to make butter sheets, basically the stuff that you would use for croissants or bakery applications. Those are things we know we’ve heard from customers on how we can make products that are specifically geared towards that. In the long run, those are some of the issues. Some of it’s also from an Export Council perspective, educating customers on why U.S. butter is a different color, helping them understand how to utilize it. And even if they choose to use 80%, how to adjust their formulations to that to help understand, “Hey, this is a simple difference of 2% fat difference.” We can work in that space here, too. Long term, I think the U.S. needs to be sure, and this is something we’ve seen in all the other export products that we’ve seen over the years, is not solely trying to sell what we make here in the U.S. and say, “Hey, you should try this instead.” But instead figuring out what our customers are asking for and really making that product. And a lot of that goes down to also the formats and trying to move beyond just bulk butter for further processing into really targeted markets with those specific products. Ted Jacoby III: Joe, do you think the butter industry will invest in those things to increase our capabilities to deliver what the customer wants? Joe Maixner: I think eventually they may have to if our fat components continue the direction that they’re going. Some of the forward thinkers will be the first to adapt, and they’ll be the beneficiaries of investing in some further processing type manufacturing to be able to account for that. Cause at the end of the day, the profit’s in the value add. It’s not in selling bulk.  If there’s production capacity, and there’s space to do the addition, and somebody has the foresight to take the chance on it, I think that the payoff is there. Because if you get into that food service type packaging or laminated butter sheets or you get into a product that nobody else is making, that makes you very sticky in that market. You own that market. Will Loux: Even as we’re talking about butter here, we’ve got to think of other, fat-heavy products that could actually play really well in the international market. I tend to think whether it’s, like a UHT cream product, I know there’s always interest in like a frozen cream product. That’s a hard thing for the U.S. to make in some ways. I think UHT creams, we continue to see grow even as we see UHT milk itself actually decline globally. But we’re seeing real interest in that food service sector of, “Hey, let’s get whipping creams that are really targeted towards some of these international markets.” As much as for the U.S. it’s geared around, “Okay, what’s the most storable form of fat?” I think that’s step one, to find a way to export it. But step two is really what are these value-add fat-containing products that we can actually be targeting and competing in as well. And then I think balancing to like an AMF or a whole milk powder, but then using our butter and creams for the value add opportunities. Ted Jacoby III: I agree. Joe Maixner: Let’s not forget cream cheese, either. Cream cheese internationally has been phenomenal. That has plenty of trajectory to keep going. Miguel Aragón: I [00:36:00] must agree 100% with what Joe was saying on cream cheese. We are seeing phenomenal requests for cream cheese throughout Latin America, now in Asia. As what you were saying about channels, Will, we are now working with retailers in Central America with butter. Right now, it’s food service packaging going into retailers, but I think that’s a very interesting thing happening because once those brands of U.S. manufacturers start showing up in the retailers, I think we’re gonna have a better pool of U.S. butter. Ted Jacoby III: I agree, Miguel. Will, I think we should move on to the next couple of questions.  – I’m gonna read them both out because I think they’re very related. The first question is, can the U.S. grow cheese exports fast enough to keep up with whey protein demand. And then the second question is, will the U.S. have the protein to supply both the rising domestic and international consumption? I’ll answer the Second question first, which is, my dad, one of the things he drove into us as traders was, at the end of the day, everything’s a matter of price. Which means supply and demand will be regulated by what the price of protein is in the global market. I think it’s fair to say Europe has a much greater ability to add whey protein processing than the U.S. does because a smaller percentage of the whey offtake from cheese plants in Europe is currently being processed into whey protein. So, we will see some pushback there. But in the end of the day, that’s simply gonna self-regulate over what that global price is. My prediction is, can the U.S. grow cheese exports fast enough to keep up with that whey protein demand? I think we are reaching a point where the U.S. is consistently priced where the world market is priced for cheese, and I think that is going to change the way new cheese plants get built because we have had pushback for for 40 years. It’s exactly what Miguel has been talking about, is you don’t make the cheese that we want. Well, if we’re consistently now priced properly into the international market, my challenge for the cheese industry is someone needs to build a plant that supplies the international market with what they want, because we’ve arrived at the point where we’re gonna be consistently competitive now, and that risk becomes worth it. Miguel, do you agree? Miguel Aragón: Totally. I couldn’t have said it better. The market is there; it’s waiting for us to take more of it, but we need the right product now. Ted Jacoby III: And I think that whey protein demand may actually drive someone to do it.  What do you think? Will Loux: I agree with everything you’re saying. I think these are two inextricably linked pieces. Right now the signals are such: “Make more whey protein capacity” is clear. There’s also an element of “make more MPC capacity” or “make more capacity with the skim stream targeting proteins” as well. I think what’s holding back some of this capacity to date is probably much more the profitability on the cheese and on the fat side, and where those prices are at. From the dairy farmer perspective of if they’re investing is, the dairy farmer getting the price signals on the protein side? Because right now they’re getting the [00:39:00] price signals on the cheese side and on the fat side, and those are saying not as much to grow. These all need to be put into the spectrum of like, if we successfully grow our cheese exports and keep that international price relatively firm and grow demand abroad for cheese, and grow demand abroad for fats, it’s clear to me the protein demand seems pretty much insatiable here in the U.S. I think there’s a ton of untapped demand internationally, especially as GLP-1s start launching internationally. Like, there is a lot of international demand that I don’t think the U.S. should lose sight of, particularly with regards to whey proteins and milk proteins and all these other products. But it comes down to: can we grow our exports of cheese and butter, not just where we’re setting the global price for those products, but finding ways to make that stream profitable internationally, just as we’ve made the protein stream now incredibly profitable from a whey protein perspective. Folks are gonna come, particularly in Europe, as you said, I think they’re manufacturing over a million metric tons right now of sweet whey in Europe. Some of that’s gonna go to high-protein whey products. We’re gonna have more competition in that space. We’ll see what the price ends up being. All of these things are inextricably linked. And when I think about the mandate here at the Export Council, it’s like, how do we grow those cheese, those fat, and those protein exports, to keep that profitably moving and continue that investment? Because demand’s there for protein, and we’re seeing good demand internationally for cheese. We’re moving the fat overseas. But how do we do that in the most valuable way possible, I think is really what’s gonna be that next era of U.S. dairy exports. Joe Maixner: Will, I’m gonna ask you a question, ‘ cause I’m gonna push back a little bit. You said that farmers aren’t seeing the signals because of cheese and fat. You don’t think a $17 plus Class III and an $18 Class IV basically for the next year, plus your return on beef, plus your cheap inputs on feed is not enough to get the farmers to expand? Will Loux: Oh, I think they will continue to expand. When the nonfat dry milk price shot up, I think that was a reflection that we were short on protein. That we pulled so much out of the dryer, that was that reflection. But I think as Mike even said on one of your previous podcasts, that it was really shown in the PPD rather than necessarily in the protein price. I don’t mean necessarily they’re not getting the signal, it’s just some of it’s our pricing system is a convoluted signal. Ted Jacoby III: Will, you’re speaking to the choir. Mike Brown: I’m gonna have to quote you on that one. Ted Jacoby III: I’m gonna take this opportunity to say, Will, thank you so much for joining us today. This has been a fantastic discussion. I hope you come back soon and join us again, because we always love having you on our podcast. Will Loux: Always fun being with you guys. Thanks for having me on. Miguel Aragón: Bye, guys. [00:42:00] End Commercial: Mike Brown: For one part of the supply chain to be successful, everyone has to be. My superpower is practical application of data and analysis. I believe firmly that Jacoby’s success is because we help our suppliers and our buyers be successful. I’m Mike Brown, and I love working for T.C. Jacoby & Co. because I get to help people make their businesses more successful.
• 
  The Perfect Storm for Milk Solids 30.07.2026 36min

  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. Got questions? We’d love to hear them. Submit below, and we might answer it on the show. 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 really tight in a month. And, we’ll see where it goes. But production does seems like it was hit harder. I’m just wondering if maybe the age of the herd may have a little bit to do with it. Josh White: It was also pretty warm nights for the Midwest. It’s pretty well documented that above 70s: tough on cows; below 70s: allows them to recover nicely. I’m in Gurnee, Illinois, which is Grand Rapids [00:03:00] latitude on the Michigan side. For us to get nights above 70 is rare. And we just went through a pretty good stretch where we had a lot of them. The entire Mideast and the Midwest, we went through a solid four or five days of pretty bad smoke. At least our area was bad enough that just walking outside to get your mail, you could taste it. So I can’t imagine that helped anything. Greg Scheer: How much it hurt is hard to quantify maybe, but definitely didn’t help things. Josh White: Are we still really talking about two different countries, more or less? California, everything seems to be fine. They’re running great. They’re just pumping out milk, and then the rest of the country where it feels a little tighter? Greg Scheer: That’s the sense I get everybody I talk to. Yes. You’ve got California on an island there just filling up their plants, and everybody else in a tighter feel, all the way from the Upper Midwest, Mideast, Northeast. And then as you mentioned, I do think the pull to the Southeast will be starting fairly soon as their production slows, and by mid-August when they’re bottling for schools it’ll really get tight. Josh White: Europe is also talking about some of the same things. Heat sounds like it’s impacted France the most. Germany’s been pretty resilient. Everything I’ve read or heard is that in the recent weeks, people have taken their milk production forecast for the remainder of the year down in Europe, and by a noteworthy amount. To be clear, I think most expect European milk production for 2026 to be higher than it was in 2025, but it’s been notably higher through June. And looking ahead, for them to be taking those numbers down to modest growth means that they’re expecting year-over-year numbers to be down the second half of the year. So Europe seems to be slowing its rate of growth. Curious to what that means going into 2027. We seem to be making good milk, and we’ve got plenty of ability to process it, but the rest of the world feels like it’s starting to slow its growth rate, and maybe start to slow down as we look ahead to 2027. Class I plants looking to start filling up a bit in the next two to four weeks. Jared, what’s that mean for you and your team and your products? Jared Miklasz: Yeah, moving over to the condensed and fluid skim side, the market has become noticeably longer over the past couple weeks, and the obvious driver there was the disruption that Fairlife experienced, which affected multiple plants across the country. With those plants still operating below full capacity following that cybersecurity event, milk that would have normally went into their UF and finished protein beverages has been redirected into balancing outlets which, in turn, made condensed skim much more available, and that increased availability was real. We saw a lot more local offers as a result. As operations normalize and those plants continue to ramp up, I would expect some of that excess product to be reabsorbed, although the timing remains still uncertain. Condensed skim has been tight for much of the year. Obviously, that’s been supported by the steady Demand from both Class II and III. And the strong nonfat demand has also kept skim solids competitive. As those dryers continue to pull available skim [00:06:00] away from the condensed markets school milk will also begin here, as Greg alluded to, which should move more milk back into the bottling programs and further reduce the amount of condensed skim available for manufacturing for these Q4 months. Moving over to the UF side of things, that continues to have the strongest long-term demand story. We’ve touched on it almost every podcast, but high-protein dairy appears to have real staying power. Demand is coming from athletes, consumers focused on weight management, older adults trying to maintain muscle. And that’s even beyond the folks using the GLP-1 medications who are told to prioritize protein. That demand also extends well beyond protein shakes. It’s into yogurt, lactose-reduced products, other nutritional beverages, other applications that require greater control over protein, lactose and total solids. But the other key part of that is the cheese, as that’s an important outlet for UF. As those butterfat levels in the farm milk continue to rise, high protein UF can help rebalance that cheese vat and improve yields. The challenge is that cheese makers are competing with higher value protein beverage and yogurt for that same UF supply. More UF capacity is expected to come online, though, here later this year and into ’27, but that does not necessarily mean that the market will become over-supplied. I think the key question is whether capacity grows faster than the demand. The category obviously remains strong, although that increased competition from a wider retail perspective and potential consolidation could eventually slow growth. But so far that demand has continued to outperform expectations. That strong UF demand also tightens the broader skim market because, obviously that milk is moving into UF and no longer available for condensed skim or nonfat. But, overall improving milk production should create more opportunities, particularly in the skim market. However, that strong demand has regional processing constraints and plant reliability all play key factors here long term. Josh White: So we’re probably not gonna be moving in a straight line here, right? As production responds, we’re trying to anticipate how demand continues to grow. We definitely know it’s in vogue. It seems structural, like that we would see more of these protein-enhanced consumer products coming online that are using liquid protein, as well as the popularity of the whey products and some of the others. But over the course of the next 30, 60 days, how are you feeling like that balances out? I heard you mention that we don’t really see a lot more UF coming on until maybe later in the year. In the meantime, if I’m mapping this out correctly, particularly in the eastern half of the country, we’re already snug milk. We have a lot of capacity for cheese that has been filling. We got hit with some heat, and we’re trying to digest the impact on milk production, but we believe there’s been some already in mid-July. And Class I’s gonna start to ramp up in August, and at the moment it feels to me like we’re gonna be competing pretty heavily in all of these sectors for the available milk solids that are out there, and it’s already snug [00:09:00] before the Class I starts to pull their share. Jared Miklasz: Yeah, it feels like a perfect storm here. Everyone’s competing for those solids in the back half of this year before that additional capacity comes online to meet some of that demand. And that competition’s been playing out all summer, but I think it’ll really heat up as we get into August and September, and October, and schools start ramping up, and all, everything aligns there. So I think it’ll be very interesting to see, if any product sectors get shorted.  On the protein beverage side they have shelves to make sure they stock and keep that space at the big box stores as well. So I think they’re gonna try to get their milk, but you alluded to it, these, investments on the cheese side, they’re gonna wanna keep those plants full. Jared Miklasz: So it’s gonna be interesting to watch. Josh White: June milk production was a little bit higher than maybe most expected, 2.3% for the country, if I read it right. But most of that heat impact has been in recent weeks, right? The recent three weeks, so since July. We’re looking at a milk production number that’s dated, but we’re experiencing a milk production climate right now that seems to be a little bit tighter for a variety of reasons. But probably one of the bigger one is normal seasonal summertime heat, but may be coming on a bit earlier than expected and a bit stronger than we’re used to at this point in time. We’ve had more headwinds in July. Let’s talk cream for a second. Butter is moving counter seasonally.  Overall, the market still feels heavy, but normally this time of year we wouldn’t be moving in the direction that we are. So let’s go with where everything starts. What’s happening on the cream side of things? Jared Miklasz: Yeah, fat remains tight, which has been, somewhat surprising given the amount of milk being separated for the high-protein beverages and all the value-added skim products that we just talked about. As those markets continue to grow, obviously that generates butterfat and that has to find a home. But based on that, I, I would’ve expected more cream to be available, but instead that market has continued to absorb it. Butter is currently trading in the 155 to 160 range, well below levels that we saw last year. And at those levels, cream is much easier for the manufacturers to use in ice cream, cultured dairy, cream cheese, and other Class II applications. It reduces that risk far as finished product and carrying less value. but part of that may be the manufacturers that, you know, adding that fat back into formulations after pulling back when butter prices were much higher. Lower fat cost obviously as far as the taste and texture can improve flavor and yield across the board for a range of products. Even with the stronger milk production and continued growth in the farm level butterfat I do not expect that the cream market is suddenly gonna become long, particularly during these summer months and with the heat that’s still on the horizon and pressure on both milk and volume and components. Over time, the additional milk and fat production should help bring the market back into better balance. But right now, it’s been long. That processing capacity will remain just as important as the total volume that’s being produced. Josh White: Is Class II performance still very strong this year? Jared Miklasz: It is, yeah. They’re the ones that are soaking up the majority of that fat right now. Josh White: Do we have a sense for if we had to try to measure the whole category, and I realize there’s a lot of products that go [00:12:00] into that category, it’s pretty difficult to paint the broad brush. But do we have a sense for are people looking at current markets as an opportunity to build structural inventory, or are they just moving that much more at the shelf? Jared Miklasz: I don’t have a good answer for that one, man. Josh White: Yeah, I don’t either. It’d be curious. ‘Cause if our Class II performance, we’ve seen just domestic performance in certain products look really well year to date. Like the amount of nonfat that’s been consumed domestically, the Class II numbers suggest that things are going really well in, in those markets. I’m just curious if consumer demand is up that much for some of these because maybe pricing promotions or other things, or if there’s been some structural stock building in anticipation of needs the rest of the year. Let’s move on. Let’s talk about cheese a bit. Cheese just made a pretty decent move higher. In Europe similar things, mozzarella prices have really started to move higher in Europe. And now all of a sudden with the U.S. moving higher and European cheddar quite a bit lower than the bounce they saw on their mozzarella, we’re not maybe in quite as an advantageous price position internationally as we were before. How do we see that playing out? Jeff Daanen: You just wonder the real effect is it gonna be for a month or two when we see what happens and how much cheese is out there. But there is cheese available. If you wanted extra loads, they are there. We’re pretty heavy in cheese. The only thing that we don’t have a lot of right now is mozzarella. A lot of that had to do with the World Cup, and there’s some plants that shut down for maintenance. Like Jared said, it was kinda like the perfect storm. plants shut down. People were eating a lot of pizza because of the World Cup, a lot of house parties and stuff like that. But in about another month we’ll be out of this, and there’ll be plenty of mozzarella available. Jennifer S. Kuo: Our price is a lot higher right now than compared to Europe. especially in the Middle East, and even in Asia still, so many people delayed what they would’ve normally ordered in Q2 and going into Q3 because of all the uncertainty, the much higher fuel costs. Everybody has depleted their inventory. And despite our higher prices, we are still getting many requests now still from the Middle East. Pricing really isn’t an issue. It’s just how soon can you ship, and how soon can you guarantee that it’ll get here? So price does not seem to be the barrier right now. Everybody has used their inventory, and they all need to restock. We have the supply. They’re willing to pay a little more. Europe hasn’t really been a conversation with any of our customers. They have not really tried to push back and say, “Europe is better priced right now.” But yeah, the demand is definitely there right now, despite the jump in our market recently. Josh White: Interesting. So it feels like the international demand’s there. The customer’s de-stocked. But at least for products other than mozzarella, we feel really heavy domestically. Is that still accurate? Jennifer S. Kuo: Yeah. Yes. Yeah. But we are seeing the demand in the Middle East is not just for mozzarella right now. It is more geared towards [00:15:00] cheddar. We are getting more inquiries for cheddar than mozzarella right now, which is good for us, both white and color. Tyler Jokerst: Obvious barriers there or risk can be tied around the current situation in Iran as well. Jennifer S. Kuo: The Red Sea seems to be an issue now as well. Tyler Jokerst: Yeah. Josh, you’re dealing with updated issues 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. So it can create a major supply chain choke point for just anybody trying to get any kind of imports into the region. Josh White: Including Europe, right? Tyler Jokerst: Yeah, because, that tends to be a route that can cut down on transit times. So you can run into situations where you might have to go around the Cape of Good Hope to get where you need to get. So it can cause a lot of complications across the board. Josh White: So, you got an international market that does demand product. They’re not well covered, but we’re constantly fighting our ability to access and supply that demand. Same story two months later. Jennifer S. Kuo: Yeah, and freight has doubled, And that did not seem to be a barrier. Tyler Jokerst: Nope. Josh White: Demand seems resilient then, huh? Tyler Jokerst: Yeah, so I guess Josh, not being too familiar on the dairy side, still learning a lot I would imagine that means the price difference there is significant enough where historically logistics has been a major barrier for U.S. product getting international. I think that clearly the opportunities continue to make themselves clearer for international growth with U.S. dairy product. Josh White: If we could wave a wand and the conflict was over tomorrow, which is not likely, I understand that, do we think that customers are going to step in heavily and demand’s gonna feel strong at that moment because they’re not getting an adequate amount of product? Or have they been purchasing to be safe all along and trying to stay ahead of their needs? Jennifer S. Kuo: I think they’ve been trying to wait it out, and they keep thinking, “Oh, okay, it’s, the war is over, the war is over,” and it keeps restarting. I don’t think they have any inventory now. They wanna know how fast can you get it here and how much. Josh White: Specifically as it relates to the Iran conflict, where are we at in terms of demand destruction? Because when we started these conversations, and I think we had Cefetra on a call probably almost two months ago now, and we asked the question: how long does this have to go on before it goes into notable demand destruction within the region because people can’t import the raw materials they need to make the products that they consume? If price isn’t, really the barrier at the moment, it still is access to the supply. I think at that point in time we talked about August sort of being, like, the magic month to where if this lasts into August, we’re gonna start to really hurt dairy consumption within the region. Jennifer S. Kuo: I think that’s still the magical question we’re trying to find the answer to. Tyler Jokerst: The war is prolonging the situation. It could’ve happened by now, but that huge variable is not really giving us a good read. Josh White: Do we think the answer is gonna be universally the same between milk [00:18:00] powders, butterfat, and cheese, or is it different for different products? Jennifer S. Kuo: The answer’s the same because it’s availability. They’re all on the same boats, right? Yeah. You don’t ship cheese separately from powder separately from butter. I think it’s all just access based. Josh White: I’ll clarify the question. It’s less about the ability to get the product and more about at what point in the timeline when you can’t get it conveniently, do you start to have demand destruction on the consumer level? Because you can’t get the cheese, which you will find its way to retail, the butterfat, which is largely an ingredient for processed cheese applications and other things, the milk powders, which serve some of the same and some different manufacturing products. All three of them overlap each other like a chain, but the cheese is closest to consumer. The butterfat is very close to consumer as an ingredient making some of these processed cheese products and other things, milk powder is going into some of that, but then also as an ingredient maybe in other applications like bakery and some consumer packaged goods. If we get into August, which of those areas is most vulnerable? Is it the consumer products because they really are bringing it in just in time, they have to make what they make they’re considered more luxury type items that, you can cut from your diet if you can’t get it versus maybe something along the lines of manufactured products that they may have more deep inventories of, and they will run out, but they might not be running out until September or beyond. At this moment I don’t get the impression talking to European colleagues, talking within our own team in the different product categories, it doesn’t feel like material demand destruction yet. It seems like we’re still finding a way to get some product in, seems like they’re still willing to pay for product, seems like some stuff’s still happening. It’s just at some moment that will come to a head, I think. And we initially expected by August it would become a real problem that meant we’re going to be missing dairy demand out of that region. And we’re knocking on the door of August. Josh White: We’ll be right back after these messages. Diego Carvallo: I’m Diego Carballo with T.C. Jacoby & Co.. T.C. Jacoby & Co. specializes in international dairy markets. For new customers that haven’t done business with Jacoby, I would tell them that we can provide them with many of the powders, dairy products that they consume, not only with the physical product, but we can also help them mitigate their risk. We know dairy. We know the main players. We know the main providers for the whole value chain. We are one of the strongest players in the U.S. market because we have contact all the way from the farmer moving the liquid milk all the way to the end users that buy the end products. I am Diego Carballo with T.C. Jacoby & Co., and we bring dairy to the world. Josh White: Let’s shift gears. Diego, let’s talk a bit about nonfat dry milk, skim milk powder, and what’s happening, globally [00:21:00] there. Yesterday, we had a firm GDT. What does that tell you? Diego Carvallo: We’ve seen the market under heavy pressure, mainly in the U.S., which was the market that was the most expensive for the past I would say six months. It seems like the U.S. market is going back into a price range where we’re competitive internationally. And that had to happen because the U.S., as we’ve mentioned before, we need to export about two out of three loads that we manufacture in the U.S. for nonfat. And we were not competitive for a long period of time. Our prices were $400 to even $1,000 per metric ton higher than European prices. And now that we finally have plenty of availability we have to find a price where exports become competitive again. And that’s what’s happened. In the past few weeks, we’ve had a few additional factors that have added pressure to prices, and that’s what Jared mentioned on plant interruptions in the U.S. And that’s definitely shifted some skim milk concentrate and some products to the drying towers. And that’s adding a lot of pressure onto prices. We’re seeing more inventory, more product availability from the manufacturers. The market is looking for other outlets, and those outlets are in the Middle East, in Asia, and other places, maybe South America, where the cost of the freight has gone up to an extent where we’re paying probably twice what we used to pay. So the exports price has to come down so that we’re competitive again. We should find some support in the current levels. We’re close to the $1.40s and the physical offers are even lower than that especially for SMP. For SMP, we’re seeing offers close to the $1.35, which is ten cents under the current futures. And I think at that level, we’re starting to be competitive even with a more expensive freight rate. I think we should find support unless we start seeing Europe trend lower and New Zealand prices also trending lower, which hasn’t happened at this point. A lot of availability around and not too many customers looking for product at this moment. Josh White: Okay, on the whey product side, it is absolutely the definition of a summer market right now. I think after two quarters of prices constantly moving up for whey proteins, and the whey market trying to rebalance so many changes over the past year. Over the course of 2025 and into early 2026, we saw a lot of large sweet whey powder producers upgrade their facilities to higher protein WPC80 or WPI. At the same time, there was the commissioning of a very large sweet whey powder facility in Texas that is offsetting the production that we’ve lost, and that’s been a bit turbulent. And that just means that we’re exchanging approved brands for both domestic [00:24:00] customers and international customers for a new brand that needs to be approved. And so we’ve seen a trading range for sweet whey powder that’s been 60 to 70 cents for quite a while. But the actual spot market has seen a lot more basis volatility. New brands trying to buy their way into business, brands that remained that have legacy or approvals for perhaps Asian clientele in a market that seems to be pretty short right now, they’re getting bigger basis premiums. So sweet whey powder has been largely range-bound, but that doesn’t really tell the story. It’s been a big shift in who has the product and where that product can go. On the protein side that story’s pretty well-documented and well-reported at the moment. It is shockingly resilient. Diego mentioned that milk proteins are realizing the benefits of this health and wellness movement. Some of the current trade relationships might be supportive of milk proteins. Aside from that, we’re just seeing more demand, people formulating to it, buying more and using more of it. Jared talked about the UF side of things and how there’s just new demand creation in a lot of different categories from beverage to, some of the other Class II products. The whey category remains just on fire. It seems to be both products. Now, we had two quarters in a row where people were terrified they couldn’t get access to supply, and they watched pricing increase by 20-plus percent. Now we get into the summer and pricing hasn’t increased over the last few weeks, and that’s making some people nervous. You’ve got a lot of people out there that are like, “Oh, it’s not gonna continuously go up. does that mean this market’s going to crash?” It’s always possible, of course. These markets don’t move one-directionally. We should expect a retracement at some moment in time. But everything I read from the consumer demand aspect of it, I don’t see any cracks in the floor. What I see is we’ve moved pricing up so rapidly that now that people are going into the summer months and maybe taking some holidays, if they come back in August and need to replenish, this thing goes right back up. If they come into August and find out that the movements on the shelf at the grocery stores have slowed as much of a price increase we’ve seen, we should look out. So I’m not in either camp right now. I guess I’m a little bit more of the belief that the consumer profile seems to be growing, seems to be willing to pay the prices that we’ve seen. And every time we start to think that the GLP-1 catalyst will end or mature, the GLP-1 drug gets cheaper, you can take it in a different form, and a larger percentage of Americans are actively using the drug. I’m also starting to see the GLP-1 aspect of the protein market get reported in Europe more. We have to remember, the U.S. market is nowhere near mature and in terms of its adoption of GLP-1 as a weight loss tool, consumers are educating themselves at a rapid level, trying to understand what the right foods are, and dairy seems to be on the right side of that discussion. Whey protein maybe being the biggest beneficiary. Milk proteins, though, certainly [00:27:00] a beneficiary. And the rest of the world still can follow. So I don’t know. I remain pretty bullish protein overall, but I think it would be irresponsible to assume that this is a one-directional market, and that it’s just gonna resume an uptrend as we get past the summer slowdown that we’re experiencing in North America and Europe. We need to be aware of what some of the potential upside shocks could be to the market as the globe enters those months where we produce the least amount of milk. We should keep our eye on a few potential shocks. Not all to the upside, some to the downside but I think we’re vulnerable to see maybe a little bit of volatility in the months to come. Let’s go through the group as sort of kind of a fun round the table. Most important discussion or impactful thing in the past week that has your attention. So Tristan, let’s start with you. Tristan Suellentrop: One of the most notable developments is the continued shift towards milk proteins. As WPC80 and WPI prices remain expensive and a little bit more difficult to source, I’ve noticed more people are evaluating MPCs as a partial replacement which is creating stronger demand across the entire high proteins category.  Kait, how about you? Kait Holzschuh: There does seem to be a lot of demand for whey permeate and lactose abroad that you just don’t see in the U.S., so I find that kinda interesting. Josh White: Yeah, good point. We didn’t touch on that, but it started with lactose, and now it’s even cascaded to whey permeate. The amount of inquiries that we’ve received in the past couple weeks across all sectors: international feed sectors, international food sectors, domestic food, and domestic feed. There’s clearly it’s clearly a tight market. Great point. Thank you. Miguel? Miguel Aragón: It might be just isolated to Mexico, but there is a glut of cheese in Mexico. When we were in the $1.40s, probably, a lot of cheese made its way down there, and it has affected the market right now. With the prices now, the hope of the customers that we talk to is that things will level off. But right now, still a lot of cheese, a lot of cheap cheese in Mexico. It affects current business right now. And the second one is demand during World Cup was not as good as expected, and this comes from the Association of Supermarkets and Convenience Stores in Mexico. So two things that really caught my eye in the last two weeks. Josh White: How do we feel the same question would be answered in the U.S.? Do we think that the World Cup impact on demand was worse than, equal to, or better than expected? Jeff Daanen: I think it was better than expected. Because when this first came out, I didn’t think that it would impact a whole lot. But when it was all said and done, it just seems like the snack part of the cheese business really took off, along with pizzas. I think there were a lot of pizzas consumed. That’s why mozzarella’s really tight, and it probably will be for at least another month or so. Josh White: Jonathan? Jonathan B. Powers: Yeah, I think probably the most impactful thing is talking about WPC [00:30:00] 34 and nonfat. Nonfat and SMP hasn’t been readily available in the Midwest, and there’s a need for that protein range in the calf milk replacer world, and we’re starting to get a lot more conversations around stockpiles for those products. As we’ve discussed, WPC 34 is kind of a dying product. There’s not a lot of people that are making it anymore, and there seems to be a lot of companies, even in the food space, that are still very reliant on it and trying to satisfy the need for it when it isn’t necessarily available. We’ve had people reach out for permeating lactose. The volume of requests has been astonishing, honestly. Josh White: Manuel? Miguel Aragón: Where I have a lot of my focus is cheese in general. It just feels like there is something brewing right now. Technically, it’s entered a uptrend right now again and it’s still choppy, right? At least on the futures board. But it feels like there’s opportunities there and yeah. So I’m just soaking up everything I can hear about cheese right now and really try to get a feeling for the market there. Besides that, nonfat is just shaving off more and more. We basically broke the support we had for a long time now, so it really feels like it’s on another leg down. Yeah, we’re gonna see how that plays out. I personally also think we’re gonna find support in the 140s. We might test a little lower than that, but at some point, it should stall and become a little more stable. Josh White: Diego, based on what you said about S&P in the 130s and then what Manuel just said about the technical support and what that looks like, that kind of aligns, right? Because I think I heard you make the comment that as we, a 140 nonfat, you can make S&P cheaper for those that don’t really pay attention to the difference. Lactose is really tight, too. Do we think that there’s a connection to why the milk sugars are tight, and all of a sudden, we are seeing pricing that’s a little bit more SMP competitive globally? Diego Carvallo: I do think that there is, yeah. We made very little SMP for the first six months of the year because it wouldn’t make any sense to export when we’re $1,000 higher than European markets. Now that we’re competitive, it does make a lot of sense to make SMP, especially when protein is very high and you can take it down with a cheap product like lactose or milk permeate. It makes sense to find demand in other markets for the SMP. So I do think that the demand for the carbohydrates has picked up now that nonfat has become competitive again. ​ Josh White: For the benefit of everyone so we’re all talking the same language, nonfat dry milk and SMP are typically universally used in applications, but they’re very different products. What we call nonfat dry milk is an unstandardized product. That specification is a minimum protein percent of 34. But today’s productivity [00:33:00] of components in our milk supply, the average unstandardized protein level in nonfat dry milk is pushing 38 or more percent at least 37 and a half in most times. Now, the rest of the world standardizes their product, and they standardize to either one of two things: 32%, which is the old Codex, 34%, which I think is a little bit more common. Or at least it’s common out of the U.S. that we would standardize to 34%. When we say why would there be a connection between lactose and milk powder, you can add lactose or milk permeate to your nonfat supply to bring the protein down to a standard level. So when we stay standardized, that’s what we mean, where they’re basically bringing it to a 34% protein, most commonly out of the U.S., and then that allows us to compete for international business. Certain markets can use either, but certainly would, prefer a higher protein content at a competitive price. So when I mention our futures are at $1.40, that’s nonfat, and our average nonfat has a higher protein. So if we’re standardizing, that means that we can add this cheaper lactose or cheaper milk permeate to the volume, and that lowers the overall price. So the whole conversation there was more or less like, “Hey, are we making SMP now, and are we competing globally for international business? ‘Cause if we are, that also tells us at least we’re closer to finding a support price, finding some type of global support level for the product.” But you’ll hear us really start to break down the difference between SMP, nonfat dry milk. But many customers can use either. I wouldn’t say most, but many Okay. I, we covered a lot. Yara, any discussions over the past week that you that you feel were most interesting? Yara Morales: It’s a lot of inventory in Mexico, and the customer was offering me nonfat dry milk instead of buying. That was the most surprise, we know that since the price is going down so bad, and they have a lot of inventory with high prices. They have a contract that they have to take it. That’s hard for them. They are losing a lot of money. And the inquires, they looking for whey permeate. They are looking for lactose and proteins. But it’s hard to get the whey permeate and the lactose like you mentioned it. But this is the inquiry we have in Mexico so far, just protein basically because otherwise it’s difficult right now. Josh White: Yeah, agreed. Okay, all, I know it was an unusual discussion. Thanks for joining us today on the Milk Check. Mike Brown: For one part of the supply chain to be successful, everyone has to be. My superpower is practical application of data and analysis. I believe firmly that Jacoby’s success is because we help our suppliers and our buyers be successful. I’m Mike Brown, and I love working for T.C. [00:36:00] Jacoby and Co. because I get to help people Make their businesses more successful. ​
• 
  Who Wins the Next Decade of Milk Production? 21.07.2026 43min

  The next decade of global dairy growth may look very different from the last one. For years, much of the world’s additional milk came from pasture-based systems. New Zealand added acres. Production expanded across parts of South America, Australia and Europe. But those regions are not growing the way they once did. Today, the next unit of milk is increasingly coming from grain-fed systems. That shift could put the U.S. in the driver’s seat for global dairy markets over the next 5 to 10 years. In this episode of The Milk Check, host Ted Jacoby III and the Jacoby team are joined by Scott Briggs of Bridgecape Commodities. We dive into: Why marginal milk growth is shifting from grass-fed to grain-fed systems What environmental policy and structural inefficiencies mean for European milk production Why China is shifting from building milk supply to creating higher-value dairy products Why the U.S. will need to become a more consistent exporter of butterfat Plus, beef income has helped support dairy farm margins and encouraged producers to breed more cows to beef. What happens if beef prices fall? The cows are ready. The plants are being built. What’s next for U.S. dairy? Listen to The Milk Check episode 102: Who Wins the Next Decade of Milk Production? Also available on Amazon Music, Apple Podcasts, Spotify, and YouTube. Got questions? We’d love to hear them. Submit below, and we might answer it on the show. Ask The Milk Check Intro commercial [Text not included.] Ted Jacoby III: Coming up on the Milk Check. Ted Jacoby III: You’ve got the U.S. dairy industry now in a position where even the worst-case scenario continues to be a threat for Europe or the rest of the world from a milk supply standpoint. Ted Jacoby III: Welcome to the Milk Check from T.C. Jacoby & Co., your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I’m Ted Jacoby. Let’s dive in. This week, we are excited to have Scott Briggs from Bridgecape Commodities joining us. Scott lives in Australia and really understands what’s going on with dairy markets on that side of the pond. Scott, thank you so much for joining us. We’re excited to have you. Why don’t we start by having you tell everybody a little bit about yourself? Scott Briggs: Thanks very much for the intro, Ted. I’m Scott Briggs, Bridgecape Commodities, based down in Melbourne, Australia and work with a number of Asian and Oceanic consumers to try and understand global dairy markets and try and help them risk manage. Thanks very much for the opportunity to be a part of the podcast. Ted Jacoby III: Scott, thanks for joining us. We’re really excited to have you. We’re gonna have a little bit of a debate: How do U.S. dairy production costs compare to those in New Zealand, Europe, and China today? Do we think the U.S. is building a lasting competitive advantage? And what does that mean for the global dairy market over the next five years? Scott, I’ll start with you. You’re based down under. Do you think the U.S. Is developing a competitive advantage, or do you think New Zealand will continue to be in the driver’s seat? Scott Briggs: It’s a very big topic Ted, but I think the short answer is that yeah, the U.S. is really in a great position to drive global dairy markets over the next 5 to 10 years. One of the major things that’s changed probably since about 2015, we’ve been in a transition period where the marginal milk growth is not coming from a grass-fed system anymore, it’s coming from a grain-fed system. Between 2000 when a lot of global dairy markets started to deregulate and we had falling trade controls and those sorts of things, quotas in the EU eventually coming off, between 2000 and 2015, the marginal milk growth was really coming from a grass-fed system, be it New Zealand growing the number of acres that it planted or the number of acres that it farmed. Places like Uruguay or southern Brazil or Argentina growing quite strongly and other parts of Europe and Australia as well. So that was the driver of the growth, and that’s why we saw that volatility in global dairy markets driving back towards a grass-fed cost of production. But since then, those places have stopped growing and really the next unit of growth or the next liter of growth comes from grains and ultimately that does mean that the U.S. is in a great position to respond to the milk production needs of the world. At the end of the day, you’ve got the greatest exportable surplus of grains and you’ve got a fantastic platform to grow from. That’s the 10,000-foot view of why the U.S. is in the box seat. Ted Jacoby III: You mentioned that even New Zealand is starting to go towards a grain-based system. Could you tell me a little bit more about that? Scott Briggs: I would say that’s pretty incipient, Ted, but there’s certainly steps that are being taken in New Zealand that seem to mirror what Australia’s been doing for probably the last five to 10 years. You have a marginal cost of production that is grain-fed and it’s being led by the U.S. At the moment, if we looked at the margins in the U.S. for a dairy farmer, they’re pretty good given your beef situation. But if you were to remove that beef situation or that beef revenue, you’re probably at a pretty low income over feed cost. But that’s still a highly profitable milk price for a grass-fed system. And a lot of the fixed costs are already being paid off, be it the farmer’s labor the equipment on the farm all of those overheads, they’re already being paid off by a pasture fed system. So, there’s a huge marginal return for that extra liter of milk that comes out of a pasture fed system. If you look at the steps that have occurred in Australia and that are probably starting to come to New Zealand, it is a lot more shared housing in wetter areas, feed pads, dry feed pads. It’s certainly not moving to the barn fed system that the States has got. More multiple calvers, if you like, to flatten out that milk curve. A lot more maize silage production, which just stores that little bit better and gives you more dry matter per acre as well. It’s these kind of marginal steps which have occurred a lot in Australia or even in some of our more grass-fed areas, and that are starting to occur in New Zealand. And some of the incentives that are being given, market-wise, in New Zealand to produce that shoulder milk or that additional milk are starting to respond with additional investment on farm. Ted Jacoby III: So, is maybe another way to put it that core pasture-based part of New Zealand dairy farming continues to be very profitable, but any marginal increase in milk production that would come from New Zealand, the cost of that marginal increase is probably the same or more likely probably less than the same marginal increase in milk production in the U.S.? Scott Briggs: Look, I would say that the marginal cost of production out of the States is pretty good. If you think that you’ve already got all the infrastructure paid for and it’s really just an additional growth there. But I think it’s more so the profit margins that sit in a pasture-fed system in New Zealand allow for that investment to try and get that little bit of extra milk as well. So, I wouldn’t say either or are better placed. It’s just that we do have a lot of low-hanging fruit in Oceania, if you like, to start moving into that kind of system. Ted Jacoby III: That makes sense. That makes sense. Mike Brown (2): One thing I think about New Zealand and why the system is the way it has been historically has been your cost of concentrates or grains hasn’t always been as competitive. You lead world price in a lot of cases, and your location makes you very competitive. Your dairymen have more room to pay some of those higher costs for that marginal production. So my question is the strong world price has a fair amount to do, obviously , with everybody’s growth, but in your case when you look at that difference in marginal cost versus that pasture based cost, are you more sensitive to that marginal change in price than maybe some other markets just simply because your feed costs are higher? Scott Briggs: Let’s have a look at world milk prices at the moment. The U.S. at $17 a counterweight, if you like, $16.50, $17 a counterweight. That’s low on your range. On the New Zealand numbers, that’s coming out at a $9.50 dollars per kilo in New Zealand dollars, which is a historically pretty high milk price. So, they do have that ability to just bring in PKE exports. One of the major sources of additional feed or additional milk growth in New Zealand is this palm kernel expeller which comes off of the palm kernel crushing. It’s kinda like soybean meal, if you like that they bring in from Indonesia and other palm kernel or palm crushing countries. Fonterra had placed limits on that for a long period of time because it was affecting the fat composition of the milk. Once they removed those limits, PKE imports went up 20% or 30% almost in one or two years. The last two seasons, New Zealand milk growth has been about 4% or 5% this year, and probably 2% or 3% the year before, so 6 or 7%. Nearly a third to a half of that has come from the additional energy that’s coming in the PKE. So it’s having a huge marginal impact on their growth, and it’s coming at a pretty low cost ’cause it’s a low-cost feed source. So, I think, Mike, going back to your question, they have that ability to grow because there’s such a lot of low-hanging fruit between that grass-fed cost of production, which is already paying for their farm, and the milk price that they’re getting paid, which is actually a marginal cost of production out of the U.S. Mike Brown (2): What kind of world fat price might change their incentive on PKE? We’re seeing a little bit of that here because it’s very expensive here, and people look at their marginal return. It isn’t, of course, near what it was when fat was $2.50. Do you think, depending where that world market settles, will that change the incentive to use PKE? ‘Cause in our case, it’s fat production is the real gain that you get compared to other alternative rations we feed. Scott Briggs: I think it’s seen more as just a bulk source of feed and source of energy- to get the cow up early in the season, Mike, and peak it as high as possible, and then to keep going on the shoulder. It’s a milk solids game rather than a tweak the fat percentage game. At $9.50 they’ll be feeding it. Mike Brown (2): Yes. Scott Briggs: $9.50 a kilo of milk solids they’ll be feeding it. Mike Brown (2): Oh, yes. Yeah. I would be feeding it here, too. Yeah. At that price for sure. Yeah. Ted Jacoby III: My thoughts immediately go to Europe. The U.S. is well-positioned for growth. New Zealand is building off a very profitable base, which insulates them and puts them in a very good position of at least maintaining their position in the global market. Where does that put Europe? Scott Briggs: Europe is an interesting situation where realistically I think that they’re gonna struggle for the main drivers of additional milk production. They seem to be struggling to add any additional land at a reasonable cost, whether it be to the feed base or to the dairy base. That’s obviously being driven by environmental policy, which is very different in Europe than it is say in the U.S. or even Latin America. So I think that they’re gonna struggle at that policy level to be able to keep driving forward. The other thing that does sit within Europe is that we’re only 10 years removed from quota coming off, and so we’re still in that process of losing milk production where we should in the more marginal areas, or from the smaller farms, or from the more marginal land, and trying to drive it into places like Germany or the Netherlands. And so whenever you’ve got a core base of pretty uneconomic sticky milk, it takes a fairly heavy price response to drive change in those farms. So down at the lowish milk prices that we’ve got globally at the moment and I say, I’m happy to debate that point. I think we’re at pretty low milk prices on the range since the end of COVID, particularly with the low feed prices. Where we are at the bottom of the price range, you’re gonna still struggle to get some of these European guys out given the subsidies that they’ve got. But that also means you’re not driving efficiency back into the system. So it feels to me like Europe’s gonna really struggle to meet the global needs and be a quick mover like the States has been. Probably the call-out on that one to me would be Russia. They’ve got probably huge settings if they wanted Russia and the Stans to really grow into dairy production. But it’s not gonna be something that’s being done for the rest of the world. I think it’s gonna be getting done for their part of the world and for China. Ted Jacoby III: Speaking of Eastern Europe, do you think Poland still has a lot of room to grow as well? Scott Briggs: I wouldn’t know the specific micro settings of Poland. It does seem like they are growing pretty well. If you look at the investments that are going into some of the Stans, eventually Ukraine and some of the other parts of the former Eastern Bloc, if you like, it does seem like there’s a lot of investment in Belarus still. It does seem like there’s a lot of investment going in there to help feed parts of the world that longer-term probably aren’t gonna be getting fed by the U.S. Ted Jacoby III: That makes sense to me. With all these different factors, what about China? China’s in a pretty interesting spot from a milk production standpoint. They really increased their milk production three or four years ago, and then more or less stabilized it. Where is their cost of production and where does China go from here? Scott Briggs: Probably the first point to make is that we’ve all learned not to bet against China on dairy production in the last four or five years on milk production in particular. That’s been an incredible rise. And I think the second thing is that lesson to me is then, don’t bet against them and what they might be able to do with the quality of the product, and the investments that they’re making in manufacturing capacity now. There’s a huge push from China to value add, particularly on the protein side, and to then try and drive that down in sales into Southeast Asia and other parts of the world. They’ve obviously got a huge domestic market, but when it comes to starting to grow into things like processed cheese or fat exports or even micellar casein exports and MPC exports, that’s where I think that their next push is gonna be, is trying to move out anything that they don’t need domestically. So it’s not just gonna be bulk whole milk powder, which has been the story of the last two or three years. The structural issue that they’ve got is that their population versus their arable land is just huge. That’s a long-term limiter, if you like, for how much you can push into exports. Ultimately, as their productivity grows and their incomes grow, they’ll be consuming more dairy themselves. The steps that we’ve seen the last four or five years were really about shoring up domestic milk capability so that they weren’t a victim of world markets, and then now they’re trying to value add that milk. They’ve learned the lesson that you don’t grow milk but not grow factories, and they’ve learned the lesson that you don’t grow demand without growing milk. The policy now is, let’s do step changes as productivity rises to drive income rises. I think that they’re gonna be putting a push on certain functional products into Asia But I don’t think that they’re necessarily in a place to be the driver of global milk production because ultimately their cost of production, going back to where you started, Ted, is higher, and it’s structurally higher because of the fact that they just don’t have enough arable land for the population that they’ve got. Ted Jacoby III: But with China doing that and really trying to expand into value add and even trying to export, I gotta believe that’s causing Fonterra and the other New Zealand exporters to really shift their export strategy. What’s happening there? Scott Briggs: When you look at Fonterra, their stated strategy is to basically be a skim protein and fat company. They have recognized that the days of whole milk powder are limited. China went through a period where they went from 500,000 tons of imports pre-COVID to 800,000, and now they’re back down to 500,000 again. They’ve really gone through that boom and during that period, Fonterra’s basically said, “We need to move out of whole milk powder and move back into being a skim and fat company.” And when I say a skim and fat company, a skim protein and fat company. And so, we have seen them push 50 to 70,000 tons more skim into Southeast Asia. But what they’re now starting to do is to value add that skim, similar to what the U.S. is doing: putting on more ultrafiltration in front of dryers, ’cause that’s the highest marginal investment that you can do. Starting to do more MPCs, starting to do more value add on the fat side, as well. There’s been some huge investments in UHT cream which are gonna be going ahead or have already gone ahead and are being launched for this year, which draws fat away from butter and AMF. Overall, their stated strategy is to be a nutrition and food service company. Nutrition: protein-heavy products. Food service: fat-heavy products. And so they’re moving away from that whole milk powder. I think that the next stage for them is to try and drive those two sorts of products into Southeast Asia. Because China itself is already quite a big market for those sorts of products and is probably screaming out for, “How do we not use WPC and WPI?” ‘Cause that’s the highest priced protein in the world right now. So how do we move away from that? I think they’re also trying to help Southeast Asia grow protein as a category. Ted Jacoby III: But based on what you said of China’s strategy, it almost sounds like it means China and New Zealand are going head-to-head in that market in Southeast Asia. Scott Briggs: Yeah. Yeah. I think- And- And look, that’s a 5 to 10-year view. We’re already seeing traditional Fonterra markets or New Zealand markets, Open Country Dairy’s obviously nearly 20% of the market down there now, as well, and are making their own steps towards value-adding fat. So that’s always one to keep in mind. We’re certainly seeing a competition of powder flows and functional product flows from China, including fat, laminated fat, pastry butter, those sorts of things, coming into Southeast Asian markets that were traditionally New Zealand-dominated markets. Diego Carvallo: Going back to China’s milk production, a lot of rumors about a disease in the northwest of China hand, foot, and mouth. Very little information. We have several customers that have asked about it. Without going down the rabbit hole, is there any update in that regards? Scott Briggs: Super important if it were to be a big story. I think that the likelihood of it being a massive story is low at the moment from what I’ve seen at least. The key thing to watch for me in China is always the spot milk price. They’ve got a fantastic not that it’s particularly visible, but they do have a huge trade of liquid milk market between different zones and between companies in specific zones. It’s a little bit like your plus/minus to the Class III. So that spot milk price to me is always the one which tells you: are they having any problems? And it does seem to me like the containment strategy was quite effective early on. Lock down the zones, stop the movement of the cattle. So yeah, it doesn’t look like it, but, it’s a bit of a black box. Diego Carvallo: So, we don’t expect a long-term impact to their production as of right now? Scott Briggs: Not at this stage, but that could change tomorrow. Ted Jacoby III: Everybody, we will be right back after these messages. Diego Carvallo: I’m Diego Carballo with T.C. Jacoby & Co.. T.C. Jacoby & Co. specializes in international dairy markets. For new customers that haven’t done business with Jacoby, I would tell them that we can provide them with many of the powders, dairy products that they consume, not only with the physical product, but we can also help them mitigate their risk. We know dairy. We know the main players. We know the main providers for the whole value chain. We are one of the strongest players in the U.S. market because we have contact all the way from the farmer moving the liquid milk all the way to the end users that buy the end products. I am Diego Carballo with T.C. Jacoby & Co., and we bring dairy to the world. Ted Jacoby III: Josh, I’m gonna put you on the spot. Is the U.S. gonna continue to increase our exports? And if so, who do we increase those exports at the expense of? How is that gonna play out? Josh White: Yes. We’re going to absolutely continue to increase our exports. The most obvious area is where there’s gonna be a need, and that’s fat, at the moment. It’s pretty well-noted that we’ve invested heavily in cheese production, boy, if those new cheese process facilities are running at the moment, they’re happy to have a co-product in whey proteins. Things are looking pretty good at the moment. As a result of that, we’re assuming that anybody who can produce cheese or process cheese is trying to process just as much as they possibly can. As a result of that, it seems pretty eminent that the U.S. will continue to have available cheese for the global consumer. Now we’ll take a look at the protein side. One of the expected results of this protein movement in the U.S., and now again, I wanna clarify this movement because I think there’s a lot of chatter about GLP-1 being the main driver, and I would almost view that as just a catalyst and a reason why the U.S. market might be leading in protein consumption. ‘Cause if you look around the world, this is a health and wellness trend that is not exclusive to the United States, not exclusive to Europe. It’s happening everywhere. We receive inquiries from all over the world, including import regions, for protein. Given the limitation on whey protein availability, one would assume that we’re gonna see quite a migration to milk proteins, and Scott did a great job of alluding to that earlier. We’re finding different ways of concentrating protein and delivering it to the consumer. The result of that, fat’s going to come along with it. I’ve listened to Gus, Mike and the team talk fairly openly about the incredible improvements in components over the past several years from the U.S. dairymen. Scott alluded to component growth in other parts of the world as well. We’re going to have surplus fat, and there’s going to be extra fat beyond what the U.S. consumer can take in, and as a result of that, we’re going to be hungry to capture market share in the global market. Now, you ask, “At whose expense?” And that’s a loaded question in some ways because I think there’s two things going on. I also think fat consumption globally is increasing, maybe not at the rate protein is and maybe not as popular right now, but if you look, ever since the early 2000s when we made this paradigm shift in the U.S. to moving away from the old food pyramid model and moving into this clean label, healthy consumable products, fat no longer was the enemy, and it seems like ever since that happened, the world has also agreed, and we’ve continued to see more clean label dairy fat being consumed per capita globally. So, two things will happen. One is the U.S., we’re in position to grow our milk production more quickly than anywhere else in the world. We have the infrastructure, currently, we have the economics to do that, and we might outpace that fat consumption growth globally. Which means then, yes, we will have to capture some market share. And from who? It, it’s either going to be Europe or Oceania, and I think that’s a seasonal thing. I don’t know that I would point to either single market as being the loser in that, other than that the dairy support and economic situation and the outlook for dairy growth in Europe seems to have more headwinds than the rest of the world. One would assume that they’re a bit more vulnerable, right now, to the U.S. capturing market share. Ted Jacoby III: Joe, what about fat? Joe Maixner: Josh summed it up pretty clearly. We’re going to have to continue to be a net exporter of fat. We’re gonna continue to add fat into our system with all of these high protein demand and these components that just continue to creep higher and higher. We’re not going to consume everything that we can supply. We will have to be a net exporter of fat moving forward until either the supply structurally shifts or we find a different way to utilize it. I agree with Josh and Scott that it’s going to be seasonal dependent on whose expense it comes at because I think that our fat market, our butter market specifically, is going the direction that cheese has gone over the past 15 years, where it becomes almost a cyclical market. We’ll be really competitive, we’ll get a lot of exports on the books, we’ll clean up our inventories, and then our pricing will spike, we will not be competitive on exports for a while, which will develop this surplus of domestic inventory and force us to depress pricing again and go back into the export markets. Josh White: We have a U.S. bias obviously, as we’re looking at the world. The one limitation to U.S. capturing fat market share is the reputation of U.S. fat being quite a bit different. Our commodity butter is an 80% salted butter. Our packaging is different. The visual appearance of our product is different. The flavor profile of our product is a bit different. Up until now, the opportunity for us to capture market share has happened largely in the processing sector as an ingredient to make something else. As of late, we’re starting to realize a little bit more of a win in, say, food service applications in developing markets and other things. From your perspective, how close is the U.S. to penetrating into the food service or retail business in import regions for butterfat? Scott Briggs: Yeah. It’s a good question. I think there’s two parts to that answer. The first is that you break down trade barriers slowly, but it happens. It’s been happening since the start of trade, right?  You know, I do think that there’s the ability to continue educating the consumer to get them comfortable with the product, the appearance of the product. I think I said that to Joe once: U.S. butter, it’s not terrible. It’s a great tagline. But I’m not a marketing guy. It will continue to gain acceptance, I think, Josh. I think the second thing to recognize is that with Fonterra, so New Zealand, trying to put so much fat into food service applications, I think for the point of educating, as you say, what does that mean in Asia and China? It’s not necessarily just butter. UHT cream is just this massive category which keeps on growing in Asia. Asia’s not this singular thing. Like they’re all sub-markets. But as a generalization, bakery is huge through a lot of Southeast Asia China itself. If you travel there, it’s cakes, it’s pastries, it’s a hell of a lot of really nice product. It’s seen as a luxury good if you like and through the supermarkets and convenience stores and everything like that. That’s a huge sector which needs a more functional application. There’s a lot of growth in there. That’s actually leaving behind ingredient markets for U.S. fat, whether that be in Australia or whether that be into Southeast Asia or the Middle East. So that is actually to me, probably the lowest hanging fruit, and it’s what you’ve already seen. So it’s not like you need to necessarily change the spec immediately to go for these applications. It can be just as easily going for what’s been left behind by New Zealand. Just one point that I’d make about whose market share is the U.S. gonna take on certain products? The European milk growth in late last year really does mask the fact that we probably still need U.S. butterfat exports to balance the world market. If you were to take the 100,000 excess tons that Europe made in the second half of last year out of the market, say that was unsustainable milk growth for a period of time, once we eat through that stock, we’ve taken a lot of the U.S. growth, if you like. We’ve absorbed a lot of that growth in what you’ve made, and we needed it. So I do think that we’re going through a process of still eating through those European stocks overall, and that glut that we had, which was driven by two years of fantastically high milk prices. But once we get through that, the global consumer is buying $5,000 butter, and they’re buying $3,000 skim. And that is a price level that’s comfortable in a lot of the world. Mideast is obviously going through a few lumps right now, so we may have some problems on demand in the next six months. But once we get through that and, hopefully the conflict there is over and they return to some kind of growth, we do get to a position where we probably need U.S. fat in the world market. Mike, you made the comment about how well the U.S. farmer is now not feeding for fat, and it does seem like some of that fat component growth at least is slowing. Do you see responsiveness to fat prices significantly, and how can that change the U.S. fat balance of being a reliable or necessary exporter? Mike Brown (2): As far as producer decisions, I’ve had some conversations, particularly with cheese plants, who are seeing some changes and talking with their producers. And some are making some adjustment to ration changing sources, and what those sources are finding is what we’re seeing in the milk supply, protein remains relatively strong and still grows. Fat has slowed down a bit, and most of it is PKE. That seems to be the change. Talking with producers, I had a good conversation, actually, last fall with a very high producing Jersey herd who said that if fat gets below about $1.70, it doesn’t really make sense for him to feed PKE anymore because he isn’t getting enough return from it. I think there’s probably some doing that. Is it broad? I think when the U.S. cows are milking so well, they’re reluctant to make a lot of ration changes that might slow things down. But we’re seeing somewhat on the margin. Will it solve the problem? No, because it’s genetics. It’s the genomics, our selection for fat. There’s so much variability in fat genetics within cattle, particularly Holsteins, that they’ve been able to make huge progress, and of course that’s permanent. So I expect that fat will continue to stay high. So, will we see some moderate fluctuations from time to time? Sure. That market will, I think, have some effect, particularly since they’ve gotten so high. Will our trend change? No. We’ll continue to improve in fat and in protein with time just because genetic selection in the U.S., particularly with sexed semen and genomics, has just gotten so intense that I don’t see that changing. The rate of gain will slow because the base population is higher versus the sires that are being used, but that will continue. We may slow down. We’re not gonna turn around and go the other way. Ted Jacoby III: Awesome. Thanks, Mike. Jacob Menge: I was gonna stir the pot a bit and almost take the other side by saying I have a degree in economics, so I succumb to liking to pretend that free trade is how everything works in the world. And it doesn’t. And I think we’re pretty clearly going down this path of almost a bifurcated world of trade relationships. And I really think it would be a mistake to ignore that moving forward, especially with Russia potentially being able to supply China in the future. We’re almost taking for granted that everyone is gonna buy from the most efficient producer in the world, and we’re really going into this kind of tumultuous geopolitical landscape that it feels like we’re probably ignoring. I don’t think that changes the fact that the U.S. is still gonna have to export. We’re producing more than we’re gonna consume. We’re not gonna let the product rot. We’re probably not gonna shut down all these nice facilities we just built. But it does make me question what price we are going to be getting when we go to export the products. What happens to the basis on those export sales? There’s a big geopolitical issue when it comes to a lot of the analysis we’ve just been doing. Scott Briggs: How much of the cake is baked? How much growth are we guaranteed to see on U.S. milk supply in the next two to three years, and cheese supply, just as a function of these investments that have already been made? How much of the world trade has already bifurcated? China’s getting it from New Zealand. Okay, that could break. I could see that breaking. I could see the Middle East possibly breaking, like you’re already seeing Iran getting certain product from Belarus or you already seen China get part of it. So there could be massive breakages in there, you’re right. The challenge is if we were to stop trading between Russia, the ‘Stans, and China, if that became one zone and we all became the other zone, like the two biggest linkages are the Middle East and New Zealand, and you probably do flood the market if you were to stop that. Who would get hurt in that scenario? It’s probably Europe. It’s Gonna be a race to the bottom to try and kill some of the highest cost milk production. Yeah, how much of the cake is baked? Ted Jacoby III: I would say it is pretty baked. But I think of it more in terms of between the current trends we’re seeing and how sticky we suspect they are from a breeding-to-beef standpoint, specifically cattle supply, beef cattle supply, and being able to continue to supply the beef market with beef, I think we’re gonna continue to see some really good returns to dairy farmers breeding to beef, which means they are going to resist and be pretty resistant even when the milk price is low to reducing the number of cows in the U.S. That’s number one. That puts in a really hard floor. In addition to that, those dairy farmers, especially the really big ones, are making really good money when you add the beef income on top of the milk income, and they’re looking to continue to expand as a result. So, in terms of the capacity that’s already added, they’re gonna fill it up. In terms of the additional capacity, which, let’s just put it this way: Over the last two to three years, we’ve had a lot of new capacity. Over the next couple of years, we will continue to have additional capacity added, but at a lower rate than what we just saw, but it’s all gonna get filled up. I don’t think we’re gonna have a problem over the next three to five years filling the capacity that we build because I think that the income situation for the dairy farmer in the U.S., it’s just in a really good spot. Even if you take, what’s our worst-case scenario from a milk revenue standpoint? Whey protein prices collapse. We produce so much milk that butter prices stay low, nonfat prices stay low, cheese prices stay low. All that means is we’re just gonna be that much more competitive in the global market, and I think our overproduction is probably gonna hurt Europe more than it’s actually gonna hurt the U.S. Josh White: I’ll just maybe add to it that, the most obvious way that the U.S. has invested is to add a lot of cheese processing capacity over the past few years, massive investments. People are well aware of it. But the aggregate of all of the incremental expansions and all of that has been really significant as well. It feels almost imminent right now that we were already investing in dairy growth before the beef on farm income reached a level that it’s at today, and it just doesn’t feel like that’s going to change any time in the near future. And as a result of that, it only maintains or accelerates that desire to make more milk. We were having conversations 24 months ago about how would we have the heifers to grow the herd? How would we do this? We found a way to grow the herd. The component growth outperformed expectations, and it’s only been more consistently profitable because the revenue stream’s been spread across more things. So we’re gonna have milk, and if we’re gonna have milk, we’re going to figure out a way to process that milk. And so far, there must have been some really good foresight to do that and build all of this cheese processing capacity to absorb it up till now, and we’ve got a little runway left to continue to fill them up. But there’s conversations at every major place about how do we extend our put-through and extend our yield by shipping more condensed skim, by processing more UF milk products, by… I can go on and on. I don’t know if it’s exactly what you were asking, but are we done in investing in our ability to process more milk? I don’t believe so. The next move had to have already been thought about and has to be under construction. We’re years out from the one after that. I think there’s plenty that are thinking about the next move. Mike Brown (2): It’s kinda like the beef has created this amazing revenue stream for dairy producers in the U.S., and our use of sexed semen and beef selection has just improved that. Same with whey proteins and plant profitability. With these very high whey protein isolate and whey protein concentrate prices, even at a 70-cent whey market, your margins on your whey proteins are very high, which gives those plants a little more room to grow. But I think the other part is: we’ve always talked about growth in cheese, the milk proteins are growing, too, and as whey protein prices get higher, manufacturers and product developers are figuring out ways to use lower-priced dairy protein alternatives, and that market’s gonna grow as well. How much milk do we have left to dry into whey? How much milk are we gonna have left to dry into powder if those markets continue to grow? We don’t think they’re done yet. We think that growth is there. Will these prices stay where they are forever? Probably not, but the demand seems to be continuing to grow. Part of it isn’t will we grow our plants, it’s also what will we be making in those plants? Are we gonna be making more focus on other protein products than just cheese? Ted Jacoby III: I think one of the most ironic things about milk production in the U.S. right now is the fact that the biggest danger, the thing that would hurt the dairy farmer the most right now, is actually not milk cost. It’s beef price. What would happen if the beef price collapses to the point where breeding the beef is no longer profitable? We’re going to double the amount of dairy heifers we start producing. You know how that plays out? That plays out by, right now the number of lactations out of a cow has gone from two to three to four, which is decreasing the rate of increase of the components in the milk because you’re turning over a smaller percentage of your herd every year. All you’re gonna do is speed that up. So maybe our milk production plateaus or even drops a little bit, but the components in the milk increase will speed up as a result. You’ve got the U.S. dairy industry now in a position where even the worst-case scenario continues to be a threat for Europe or the rest of the world from a milk supply standpoint. Mike Brown (2): We look at the percentage of milk in the U.S. that is now produced by these extremely efficient, very well-managed, very well-leveraged herds, and so our susceptibility is less. It’s kinda like we’re going through a heat wave right now, Scott, and everybody says, “What’s that gonna do to milk?” A whole lot less than it used to because of the controlled environments of our modern barns. We’ve done a lot and kinda like I think in a lot of industries, we’ve had some good profitability, people have made investments for the long term. And when you make big investments for the long term, you don’t usually turn around. You’re committed to being in the business. I think the biggest thing for us, in my mind, is for years we’ve been looking at the whey and dry milk markets, exports are a huge part of those sales. Cheese is growing, and we’ve reached a point with cheese where those export sales are becoming more and more important, and so how do we sustain them over time? What do we need to do? I think a good example, Joe’s been working a lot with our opportunities in butter over the last few years and working with folks that we work with and what do I need to make to take best advantage of those export markets? We’ll continue to do that as well. We’re just thinking a lot more world demand than just, “I need to make a 40-pound block of cheddar and who will buy it?” We’re trying to think a little harder than that now. Scott Briggs: Mike, you touched on if we’d had the milk production growth that we’ve had in the last two years 10 years ago, we would’ve wiped out certain pieces of milk production around the world. The market would not have absorbed that level of additional product. Now, we certainly had a period in October, November, December last year, where things got uneconomic in certain part of the world, and we didn’t last. Because ultimately, the demand shone through and, having listened to the podcast, protein demand and that protein story is a huge part of that in the States. That, to me, is a trend that’s really only beginning around a lot of the other parts of the world. It can go underestimated from your side of the world. You guys are the vanguard in that. You’re the leaders in it. You’ve got the category. China’s got a great category in this area and is making some huge investments in it. But, we’ve just seen here in Australia and in Southeast Asia some massive investments from European companies into cottage cheese, into ready-to-drink categories with the principal idea of exporting them to Asia. And, that growth model into developing markets is always put a high price product in there that’s branded from a developed market, and then grow the category with the local champion. You get an imported product, it looks sexy and it looks great, and it’s like a luxury product, and then you grow the category by producing a lower price point product to try and then get the local population really going for it. And so that’s just started. The other thing that’s really hot in different parts of Asia is, funnily enough, processed cheese for food service. It’s a really quickly growing category. It’s a category that gets a lot of interest. We’ve spent a lot of time on the point of does the U.S. have a competitive advantage for supply, in this kind of changing world. I think one of the biggest pieces of competitive advantage that the States has is its ability to grow an export pathway. It’s a mindset; it’s a trade infrastructure, as well, with government relations and everything like that allows you to grow into world markets in a way that probably a lot of other places don’t have. If we’ve got a growing demand, and I made this point before, we might see a few lumps here, mainly because of the Middle East, right? The Middle East looks a little bit overbought, looks a little bit quiet. Southeast Asia’s having a few little hiccups with changes in Indonesia and some of their currency devaluation, like these sort of short-term issues. But longer term, it’s very comfortable for a Southeast Asian consumer buying $2,800 to $3,200 skim and $5,000 butter. These are price points that work now, which never worked before, that’s the growth price point now. I do think that we’re going to have a situation where the world market is gonna be the next engine for some of the growth in protein demand and fat demand as well. Tristan Suellentrop: Scott, being based in Australia, I’d be interested to hear your perspective on the potential super El Niño that was confirmed this week. How does that factor into your outlook for dairy production in Oceania over the next year or two? And how concerned should producers in Australia and New Zealand be if it develops as forecasted? Scott Briggs: So it’s a very detailed topic. The El Niño indicator that everybody looks at is the Southern Oscillation Index, which is screaming El Niño at the moment. The reality is that what impacts Australia and New Zealand is not just the El Niño. It can be a major impact, but we’ve also had years where it has had no impact, and probably even at a similar level of El Niño indicator. And the reason for that is the El Niño obviously talks about what’s happening out in between South America and Asia, so that pressure, but our weather system, particularly in our dairy regions, is just as impacted by how much moisture is exiting Antarctica and moving north, into the southern parts of Australia, which are our heavy dairy regions, and also into New Zealand. The other weather system that impacts our dairy production during spring and our moisture levels is how much tropical cyclone activity is actually exiting the Pacific Islands and moving down into the North Island of New Zealand, which really doesn’t have a lot to do with El Niño either. The key point is that, right now El Niño, yeah, it’s a real phenomenon, but it’s not the only thing that’s gonna impact Oceania. when you look back at the history, which we have, some years it’s a really important thing, and other years you can have a fantastic spring in what seems to be an El Niño year. The other point that I’d make is that we have fantastic moisture right now. We’re getting huge rainfalls through Australia particularly, but also in New Zealand, which are really recharging things over winter. Economics would also mean that we’ve all got a fair bit of silage buffered away from the last 12 months of good weather. So I don’t think, at this stage, we’re seeing anything that’s like a huge impact on Oceanic dairy, but it’s very early. The thing that we’re all gonna need to watch out for is how much does it rain, particularly in New Zealand in December. New Zealand in December, January, that’s really when we have to start looking at what might happen. Ted Jacoby III: Cool. All right. Scott, this was a fantastic discussion. Thank you so much for joining us. Really appreciate your insight and your expertise in what’s going on the other side of the pond. Thank you.  Thank you. Lockhart, thank you very much. Cheers, guys. Next time on The Milk Check. Will Loux: The U.S. exports as we go forward here over the next few years is at a crossroad. Do we swing back to balancing to milk fat, which would mean we’re probably short of protein? Or do we start balancing to protein, which means we’re gonna need to find homes for a heck of a lot more cheese and butter. Ted Jacoby III: Join us and our special guest, Will Loux from the U.S. Dairy Export Council as we discuss the future of U.S. dairy exports. Ending commercial: The best part of my job is working directly with cheesemakers and helping their businesses run better because they make wonderful, great products. Anything we can do to make them more successful not only helps them, but helps Jacoby. We look at how milk flows through their plant, what their real cost of products are, so when they’re making marketing decisions, making new investments, particularly on whey processing, they have a benchmark to use to determine what opportunities they have and what the returns would be. Whey has become so valuable with these high-protein markets. There’s added value that they can get by just condensing it, and maybe moving further down the supply chain in the longer term, making products themselves. My role is to help them cost that so they have a better understanding of what the opportunities can be. Longer term, we expect the whey protein market to remain very valuable. For one part of the supply chain to be successful, everyone has to be, and part of my role is trying to help people be as competitive as they can possibly be. My superpower is practical application of data and analysis. I believe firmly that Jacoby’s success is because we help our suppliers and our buyers be successful. I’m Mike Brown, and I love working for T.C. Jacoby & Co. because I get to help people make their businesses more successful.
• 
  Screwworm, Bird Flu and Foot-and-Mouth Disease: Is U.S. Dairy Ready? 09.07.2026 30min

  Disease pressure is back in the dairy market conversation. New World screwworm has moved into the U.S. Avian flu is still lingering in dairy herds. Foot-and-mouth disease is also back in the conversation after a recent Dutton Ranch storyline raised questions about what an outbreak would mean for U.S. cattle and dairy. So, we got together the experts and asked: is U.S. dairy ready? Listen to the episode. Listen here. Also available on: Amazon Music Apple Podcasts Spotify YouTube In this episode: In The Milk Check episode 101, host Ted Jacoby III is joined by Jamie Jonker, chief science officer and vice president of sustainability and scientific affairs for the National Milk Producers Federation, and Sarina Sharp, market analyst for the Daily Dairy Report and Risk Manager at Ag Business Solutions. We break down what these disease risks mean for dairy cattle, milk production, farm-level disruption and market economics. We cover: How screwworm could disrupt individual dairy farms Why the closed border with Mexico is changing feeder cattle flows, beef prices and dairy farm economics Where avian flu stands today, and why current cases are not affecting dairy like they did in 2024 Why foot-and-mouth disease remains a low-risk, high-consequence threat for U.S. livestock Get up to speed on what animal health risks mean for milk production, dairy markets and farm-level decision-making Listen to The Milk Check episode 101: Screwworm, Bird Flu and Foot-and-Mouth Disease: Is U.S. Dairy Ready? Got questions: We’d love to hear them. Submit below, and we might answer it on the show. Ask The Milk Check TMC-Intro-final Ted Jacoby III: Coming up on the Milk Check. Sarina Sharp: The border is shut, and it doesn’t look like it will open anytime soon, so we just have this vacuum of Mexican beef cattle. Ted Jacoby III: Welcome to the Milk Check from T.C. Jacoby & Co., your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I’m Ted Jacoby. Let’s dive in. Ted Jacoby III: Today we are excited to have two special guests. First, we have Jamie Jonker, chief science officer and vice president of sustainability and scientific affairs for the National Milk Producers Association, And second, we have Serena Sharp, the excellent market analyst who does our weekly market report. Serena, Jamie, thanks for joining us today. We’re excited to have you. Jamie Jonker: Thank you for having me here. I think we’re gonna have a number of things that are quite timely to talk about today. Sarina Sharp: Thanks for having me again. Ted Jacoby III: In addition to those two, we have some of our usual suspects. We have Mike Brown, our VP of dairy market intelligence. We have Jacob Menge, our VP of trading strategy and risk management. We have my brother Gus, president of the dairy fluid group. We have Josh White, our VP of dairy ingredients. And we have Tristan Suellentrop on our sales and marketing team, and Manuel Polzer, who is part of Jake’s risk management team. Guys, thanks for joining us today. So the topic we’re gonna be discussing today, there are three different diseases that have been gaining news in terms of how it might be affecting milk production and dairy cows. The first would be screwworm which has come across the border from Mexico, the second is avian flu is back. And of course, the third is Dutton Ranch recently had an episode that talked about foot-and-mouth disease on their cattle farm in Texas. And so of course, we’re getting questions about that. But we’ll start with the one that’s probably getting the most attention, and that is screwworm coming across the border from Mexico. It is now in Texas, and it is in New Mexico. Jamie, why don’t you just give us a brief background on what is screwworm, and how does it affect dairy cattle versus beef cattle? Jamie Jonker: Yeah. Great question, Ted. New World screwworm is a fly that, lays its eggs in mammals. It was eradicated from the U.S. in the mid-1960s, and by 2002, it was eradicated all the way down to what’s called the Darien Gap in Panama. That is a forested area about 50 miles wide, where there are no official roads going through it. And so that was really great news about the many decades process to get it down there. What’s happened is starting in ’23, it started creeping back up through Central America through the movement of people and people moving with their animals. Got into Mexico in ’24. Started really taking off in Mexico in ’25, and then just this past June 3rd, we had our first official case in Texas. Today there are 27 confirmed cases in the U.S. 25 in Texas. Out of those about 16 are cattle, most of those are calves castrated males. There is at least one adult cattle in that. So far, all of those are beef cattle. What happens is the New World screwworm fly lays its eggs in any open wound. And when we think about a wound, I want people to understand that can be as small as a tick bite, so it doesn’t have to be a large gash on an animal. It’s very tiny. And what is very unique about the New World screwworm larvae, and also quite devastating, is that the larvae eat live tissue of the So when the eggs start hatching, and the female lays 200 to 300, it very quickly becomes an animal health and welfare issue for that individual animal. Unlike viral and bacterial diseases though, this is not directly transmissible from one animal to another. Obviously, as the larvae mature and become flies of their own, then they can continue to spread it in that area. But unlike what we’ll talk about in a little bit, the H5N1, which was highly transmissible between cows in an individual herd, this does not necessarily transmit from animal to animal. It’s when the larvae become flies, mate, and then the next generation can lay eggs in new animals So, what happens when it gets into these animals, in particular, newborn calves are highly susceptible because of the open umbilical area, they get in there, and, if left untreated, the mortality in newborn calves can approach fifty percent. However, highly recoverable if caught early and treated. Out of those twenty-seven animals, so far that have been identified at least one actually has been euthanized because that was the right decision for that animal. Where we are today, no dairy cattle so far as of June twenty-ninth when this is being recorded. But it is growing in terms of the geography where they’re finding domestic animals in Texas that have it. It’s a growing potential risk for dairy farmers that are in the Southwest. Ted Jacoby III: Jamie, sticking with beef cattle, does the beef industry handle infected cattle with screwworm right now? Jamie Jonker: Animals that have an infestation, essentially you have to clean out the larvae, then you treat the wounds. The other thing that you do is you wanna make sure that you do prevention treatment to prevent infestation from happening in other animals. Because once you have one animal infested, there’s likely a reproducing fly population there, and so there’s a higher risk for other animals in that location. There’s a number of products that are approved for prevention purposes. And they have withdrawal times, ranging, on the beef side, withdrawal times, thirty-plus days in some cases. Some of those products are also approved for use in dairy cattle. There’s a distinction that FDA does through its emergency use authorization and conditional approval processes that typically breaks between growing cattle and lactating cattle. For FDA purposes, lactating dairy cattle are twenty months of age or older, even if they’re not lactating. There’s only one product that’s approved for prevention in lactating dairy cattle at this point in time. That’s DECTOMAX. It’s an injectable product that has a nineteen and a half day milk withdrawal period and a thirty-plus day meat withdrawal period. Ted Jacoby III: Once these cows are infected and then treated, if it’s beef cattle, for at least 30 days they couldn’t be sold to a slaughterhouse, correct? Jamie Jonker: That’s correct. And we want to encourage folks to work with their veterinarian and only use those products that have been approved through the FDA processes. Because if you’re using other products, the withdrawal period is unknown; you’re setting yourself up to potentially have a residue issue. Ted Jacoby III: And how is National Milk right now working with dairy farmers in the United States to prepare for the possibility that we will have a infected dairy cow in the U.S.? Jamie Jonker: We are pulling together resources. We actually have a resource page on our nmpf.org website. And there’s a big pop-up right, right on top for New World screwworm resources for dairy farmers. We have some of our own resources. Obviously, there are lots of people putting together really great resources. We don’t need to recreate things that are done well, so we have links to other resources. We’re also keeping a keen eye on what’s happening as we get new detections in Texas, and potentially as the summer goes on, potentially in other states as well, and working with USDA, Texas Animal Health Commission, and others on keeping preparedness top of mind. Ted Jacoby III: It sounds like if you have a cow infected with screwworm, it’s reportable, and so the U.S.DA is keeping a register of where all the cows are that have been infected. Is that true for dairy as well? Jamie Jonker: Yes. If A dairy animal is found to have an infestation , the first thing we recommend, if you see something that you think might be New World screwworm in any of your dairy animals, contact your veterinarian. Because what we wanna have is an official sample taken so that they can determine whether or not it truly is New World screwworm, because some of these larvae and some of these flies, they look pretty similar, and you just can’t tell by a quick glance at them. But we get that official determination from USDA. What that does is that triggers a response, and that response is important because it’s the response to that individual animal, it’s a response to help mitigate the risk of spread on that farm and spread in that area. And when you have one or more animals that are found to have an infestation, a 20-kilometer zone is set up around them. That’s called the infested zone. There’s strict requirements on the ability for moving animals out of that zone. Then beyond that is another 20-kilometer surveillance zone. And the Texas Animal Health Commission has a great map that shows the zones in Texas, and as they’ve had an increasing number of domestic animals found to have infestations, some of those areas are starting to merge into a pretty large geography there close to the border. Ted Jacoby III: Is my understanding correct that if a beef cattle were to get infected within a 20-mile radius of a dairy farm, you couldn’t move the cattle out of that dairy farm either? Jamie Jonker: You would be able to move the animals, but you have to move them under permit. There’s inspection of the animals to ensure that they don’t have any infestations. Depending upon where they’re moving, there could be requirements for prevention treatment. That’s not necessarily that it happens 100% of the time. If they’re moving within the state of Texas, there might be requirements that are different than if the animals are moving, say, from Texas to elsewhere. And we certainly know that a lot of dairy animals spend part of their life in Texas and move elsewhere. We saw that starting in March of 2024 with the H5N1. Ted Jacoby III: So Jamie, is there a protocol set up for exactly how the milk from a dairy cow that would be infected with screwworm is handled, and how that herd would be managed if that were to happen, and what is that protocol? Jamie Jonker: Yeah, so if you have a dairy animal that is infested, you wanna get that animal isolated. You wanna have that wound where the larvae are cleaned out and then treated. There are a couple of additional products that are approved for lactating dairy cattle for treatment of the infestation itself, so Dectomax is the only one approved for prevention purposes. There’s a topical spray and a topical gel that are approved for an animal that has an infestation. You clean it out, you treat it with that, you isolate them and then, if you’re not doing additional treatments of animals in the herd, if the determination is you’ve got an isolated case and you don’t need to do a broader prevention process, that milk from all those other animals continues to flow. You wanna make sure that you’re not incidentally transferring flies in the cab of the milk truck because that is one way that you can move these flies quite a long distance by just accidentally trapping them in your vehicle. But unless the requirement is to do a broader prevention treatment in the herd, any animal that is not treated with an animal health product, its milk is perfectly sellable, so long as they’re continuing to meet the having no residues from other antibiotics. Ted Jacoby III: So, to be clear, milk from a cow that might be infected with screwworm, the milk itself is still absolutely fine and healthy unless You’re treating the cow with a medicine to get rid of the screwworm. Jamie Jonker: An infestation is an animal health and welfare issue. It’s not a food safety issue for meat or milk. Ted Jacoby III: Do you anticipate that we are going to have issues with screwworm in dairy cattle soon? Jamie Jonker: Soon is difficult to define. I would say that we have an elevated risk that it will occur at some point in time on a facility with dairy animals, a commercial dairy facility. And I say that because New World screwworm grows well in temperatures like we’re experiencing throughout a lot of parts of the U.S. right now. It’s very cold intolerant, and if you get three or four days at twenty degrees Fahrenheit, that kills most of the flies, so that’s great. But we are just at the end of June, so we have many months yet with temperatures that are very conducive for the flies to be active. And I think the other thing is that as we look at a growing geography in Texas of where we are finding screwworm infestations in domesticated livestock we probably don’t have enough New World screwworm sterile flies being produced today to respond to that. That is why USDA has worked with Mexico in renovating a fruit fly production facility there to produce New World screwworm sterile flies. I believe it was just announced late last week. That facility is up and running and at full production capacity probably towards the end of the year. That’s another hundred million flies to complement the hundred million that are being produced at the facility in Panama. And then there was, in April of this year, the announcement of a domestic plant being built on a military base in Edinburg, Texas. The target date for that is to be November of next year to produce three hundred million flies once it’s fully operational . You’ve heard Secretary Rollins discuss they are looking at ways to move that timeline faster. But I think when you consider we started off with a hundred million in Panama, we’re gonna be another hundred million sterile flies in Mexico by the end of the year, and then another three hundred million in Texas when that is up and running. That’s a realization that this is gonna be a multi-year process, and that it’s unlikely that it’s just gonna stay in a geography near the border. So, long way of saying, yes, I think it’s probably a matter of when it gets to a dairy facility and not if. Ted Jacoby III: Serena, do you think screwworm, if and when it starts to affect dairy cows, is going to materially affect milk production in the U.S.? Sarina Sharp: I guess it depends how widespread it is, but I generally don’t think so. I think that it’s gonna be a huge headache at the very least for an individual dairy producer who has to deal with it and for his livestock. But it’s not gonna be material in terms of how many dairies in the U.S. it’s likely to impact. And especially, if you look at where the beef cattle are and the typical temperatures in those areas versus where dairy cattle are in the United States, three days of cold is very common in a lot of dairy areas. And then thirdly, a lot of the beef cattle that have it now are in ranch country. They’re not in an operation where the cattle grower is hands-on, up close with these animals every single day. And on a dairy, that’s not the case. When you are milking cows every day, and bottle-feeding calves, and checking on your heifers, that’s a very hour-to-hour interaction with your livestock, and so it’s a lot easier to contain an infestation in that environment than it is on this vast ranch country with scrub brush in the southern plains. Ted Jacoby III: That makes a lot of sense ’cause you can go days without inspecting beef cattle, but you rarely go hours without inspecting a dairy cow. Sarina Sharp: Yeah. So, when I look at the market impact of screwworm on the dairy industry, I’m not focused on milk production at this point at all. I’m looking at its impact on beef prices and how that changes economics on the dairy farm Ted Jacoby III: How do you think it’s gonna change beef prices? Sarina Sharp: It has already changed beef prices because the United States closed the border with Mexico to live mammal imports. And so, the primary way that’s impacted us is we typically take hundreds of thousands and slightly over a million Mexican feeder cattle. So, that’s young beef livestock from Mexico into the United States, feed and finish them in the United States, and then they help increase our beef cattle supplies. That border has been shut for quite a while now, and for the first months of this screwworm infestation in Mexico, when it was not in the United States and not in northern Mexico, then there was a constant hope, “All right, they’ll get this under control, and we’ll reopen the border, and those feeder cattle imports, we’ll be able to bring them in again.” The border is shut, and it doesn’t look like it will open anytime soon, so we just have this vacuum of Mexican beef cattle. That means that the U.S. dairy industry is positioned to continue to supply beef crossbred calves to the beef cattle industry. That’s beef on dairy calves. At times when we have extra heifers, which is not right now, we’ll just place true dairy animals in feedlots. The price might incentivize us to consider that, although right now they’re so valuable as dairy animals, that’s not happening, at least not at scale. And then, it impacts the dairy cull cow price as well. So, I was talking to a producer last week who sold one full truckload of dairy cull cows at an average price of $3,500 per animal. That’s just an unheard-of price in the past, and it is really adding up to a lot for dairy producers’ bottom lines. For several days here, we were looking at $15, $16 milk and $4.30 corn, and the math wasn’t working out, but when you add a beef crossbred calf check and a dairy cull cow check into that mix, things are looking a lot better when you talk to your banker. Ted Jacoby III: So, it sounds like to me that even though from a public relations standpoint this is going to be a bit of a headache and we have to make sure we get the word out of exactly how screwworm is affecting the dairy industry and how we have protocols in place and plans to make sure that it doesn’t affect the milk supply, for the dairy farmer from a cashflow perspective, at the end of the day it’s probably a positive. Sarina Sharp: It is a positive. I do want to stress that there’s no less beef in the world because of screwworm. What we’ve changed is where those animals are, and the longer that the border stays closed, the more resources that the Mexican cattle industry is gonna pour into facilities to finish the cattle that are staying there, and then also beef packing facilities so they can just process them right there. So we are not importing Mexican feeder cattle. We are importing Mexican beef. So, that’s a positive for dairy producers who are supplying young livestock. In the long run, it’s a negative for the U.S. beef industry who would love to raise those cattle here and process them here. And every day that we don’t is a day that Mexico is investing in not sending them here and sending us the finished beef. Ted Jacoby III: That makes a lot of sense. Jamie Jonker: I think the one thing I would add is I don’t think there’s gonna be a milk disruption issue. But at an individual farm level, it could be very disruptive. So nationally, you probably won’t really notice much, but at an individual farm level, depending on what happens, it could be very disruptive. In contrast to H5N1, which was really a big issue in so many different places. This is something that is gonna be at the individual farm level. Ted Jacoby III: Do dairy farmers have insurance for events like this? Sarina Sharp: So I know that with H5N1, you were able to file for some insurance protection related to your lost milk revenue, and you also registered that as an event for your dairy RP. I imagine that if you’re not gonna lose milk production at scale, that it’s not insurable Ted Jacoby III: That makes sense. ​ Ted Jacoby III: Everybody, we will be right back after these messages. Diego Carvallo: I’m Diego Carballo with T.C. Jacoby & Co.. T.C. Jacoby & Co. specializes in international dairy markets. For new customers that haven’t done business with Jacoby, I would tell them that we can provide them with many of the powders, dairy products that they consume, not only with the physical product, but we can also help them mitigate their risk. We know dairy. We know the main players. We know the main providers for the whole value chain. We are one of the strongest players in the U.S. market because we have contact all the way from the farmer moving the liquid milk all the way to the end users that buy the end products. I am Diego Carballo with T.C. Jacoby & Co., and we bring dairy to the world. Ted Jacoby III: Jamie, where are we at with avian flu? Is it affecting the dairy industry as badly this year as two years ago, and how do you expect it to play out this year? Jamie Jonker: It is not affecting the dairy sector like it was in 2024. In 2024, there were 917 dairy farms officially identified as having H5N1 on their farms, probably some more that were not officially listed. Last year, in ’25 was only 171, and so far this year, halfway through the year, only 64. So, we’re seeing a downward trend but what we are seeing here is some lingering issues with H5N1 on dairy farms this year. There have been two dairy farms in Texas, three in Utah, and the remaining fifty-nine are all in Idaho. And based upon my conversations with USDA for the farms where they have the genotyping done, these are all B3.13 strains (HPAI H5N1 clade 2.3.4.4b, genotype B3.13) so far, so no new spillover events. It’s a circulating one. And they are all related to a lineage of B3.13 that are circulating in Idaho. And so, it’s still kinda hanging out there. When I look at it, it’s not gonna have the big impact on overall milk production. When I say big, I think when we looked at 2024, it’s probably about a 1% reduction in production. That’s not huge but not inconsequential. Unless there was movement of this to places where there hasn’t been virus before. And you can think about large production areas around the Midwest into the Northeast where there hasn’t been this virus before. And so, that’s the risk, is that this virus moves to places where we haven’t had it before. And that’s why I think it’s important that we do our best to see if we can eliminate this B3.13 strain entirely from the U.S. dairy cattle population because the only reason we picked up the three spillover events with the D1.1 strain is because we had the mandatory surveillance. Based upon my discussions with folks that some of those herds and veterinarians that are dealing with those herds, if you weren’t testing for it, you probably wouldn’t have known that you had an outbreak of bird flu in your cattle. Unlike this B3.13, which was just so devastating, most herds that got it, ten to twenty percent of their herd had very severe clinical symptoms . And, you could see starting in September of ’24 into January, February of ’25, what it did on milk production in California. California had over seven hundred dairy farms in those months that, that were impacted by it. Ted Jacoby III: So if I’m hearing you correctly, this strain is far milder than the strain that affected us in 2024, and as a result it’s unlikely to have a major effect on milk production. Jamie Jonker: This is the same strain as 2024 that has affected the vast majority of those dairy farms. But right now, it’s occurring In places where that strain has already probably impacted most of these dairy farms in some capacity. And so, when they’re getting it in their farms, they’re being picked up as part of the mandatory surveillance process. And they’re not getting that big outbreak in a two-week period where ten to twenty percent of the herd needs to be in a hospital. Ted Jacoby III: Is some of the reason why it’s having less of an effect because, like with human viruses over time, cows build up immunity to it and just don’t get as sick the second, third time they might get sick with the same virus? Jamie Jonker: That appears to be part of that process. In most of our farms, we’re turning over, a quarter to a third of our animals every year, so you have a new naive population coming in. And some of these farms, what they’re really experiencing are they’re just constantly bringing in new naive animals, and they get like a rolling infection. But you’re not having 10% to 20% of the herd all at once. Ted Jacoby III: Thanks, Jamie. Now let’s move on to the last subject we had: foot-and-mouth disease. Jamie, what is the status of foot-and-mouth disease in the United States today? Jamie Jonker: Hollywood likes to glamorize things and I’m happy to say it’s been nearly 100 years since we’ve had a foot-and-mouth disease outbreak in the U.S., and I sure hope that we don’t have one in my lifetime, it can be quite devastating. But no FMD in the U.S. since an outbreak in California in the late 1920s. And importantly, there’s a lot of work that’s being done on preparation in case of an outbreak . Back in the 2018 Farm Bill, dairy, beef and swine lobbied really hard to modernize our U.S. FMD vaccine bank. And there was a significant amount of new monies that were put into that, and that has been modernized. We have the secure food supply plans, including the secure milk supply and secure beef supply plans, and secure swine supply plans that are in place to help us deal with how we continue continuity of business if an outbreak occurs in the U.S. And ,so we’re much better planned today than we were even ten years ago. That being said, FMD is a risk. We see that it moves around a lot more than we would like it to in other areas of the world. And the example that I’m gonna give, there’s seven different serotypes of FMD, and a whole bunch of subtypes. There’s one called South African type. That is typically a Sub-Saharan African type and has been quite devastating in South Africa over these past two years. In 2023, they had an outbreak of SAT 1 Type 1 in the African horn that moved into Middle East in 2025 and through the end of 2025 into 2026, an SAT Type III actually broke out starting in Asia, moving into India and China. And although not officially listed, probably also into Russia. And so it’s moved into places where they routinely vaccinate for FMD but they don’t vaccinate for this serotype. And unfortunately, the vaccines that they use do not have cross protection for the SAT types, and so it’s been a really big issue in those areas. And it’s a demonstration of how quickly animal diseases can move these days. It’s very much on my radar and of concern to me about how quickly they move. Obviously, we have several oceans on both sides of us that help keep some things at bay. But boy, there’s a lot of flights that come into the U.S. from places where FMD is every day. And we have ships that are coming to container ports that come from those areas as well. It’s not a zero risk. I would say it’s a very low risk. But we wanna make sure we keep it on our radar that we continue to be prepared. It’s better to be prepared for something that doesn’t happen than be unprepared and have an outbreak . I have fire insurance on my house not because I want a fire to happen. I have it just in case, and I hope I never use it. Ted Jacoby III: Why do you think the U.S. has been so much more successful than, let’s say, Europe at staying FMD free? Jamie Jonker: I think part of it is that bit of geographic isolation. The vast majority of the Western Hemisphere is free of foot-and-mouth disease. There may be some in Venezuela, but their political issues over the past decade, their instability , their reporting of disease has been a bit spotty, so it wouldn’t surprise me if they still had a little bit circulating there . But everywhere else in South America, including Brazil, Argentina, Uruguay, Paraguay those places have all gotten rid of FMD, and they’ve done it through vaccination campaigns and culling. Essentially eliminating it from the Western Hemisphere, our risk is much lower than Europe, which has direct geographic connections to places where it’s endemic. Ted Jacoby III: That makes a lot of sense. Serena, I’ve got one last question for you. What is the thing that keeps you and your family’s farms what keeps you guys up at night in terms of a disease or an outbreak in the U.S.? Sarina Sharp: Foot-and-mouth disease would be terrible, but it doesn’t feel like that’s imminent. I think that another round of avian influenza feels much more likely to have a devastating impact on an individual dairy. It’s not something that’s keeping us up at night every night, but it is something that when you hear, “Yep, there’s 50-plus cases in Idaho,” it feels could happen right here, kind of no matter where in the US right here is. So I think that one is forefront of dairy producers’ minds. But I just don’t think that disease pressure is keeping dairy producers up at night in the way that it did in 2024 when it was a mysterious virus. We were trying to figure out how to treat it. We weren’t sure how it was spreading, and the impact on animal health was so severe. And it feels to me like how we treat the flu and, to a lesser extent, COVID today compared to how we did in 2020. I think that’s how dairy producers generally feel about disease pressure in general today. I don’t want myself or my kids to get COVID or the flu, and we sure don’t want avian influenza on any of our farms Ted Jacoby III: I’d have to agree with that sentiment. This is what I’ve heard today. I’ve heard that screwworm, we are well prepared to deal with it if it does get on a U.S. dairy, but in general, it’s not something we’re terribly worried about affecting milk production in the United States. Avian flu is something maybe we’re a little bit more worried about affecting milk production, but the strain that’s out there today is one that’s been out there before, and we seem pretty well prepared for it. And foot-and-mouth disease is not in the United States, and we’ve got a lot of protocols in place to really keep it at bay, and we’re in a pretty good place in terms of making sure that foot-and-mouth disease stays away from this country. Jamie, hey, thank you very much for joining us today. I really appreciate it. I learned a lot today, and thank you so much for your time. Jamie Jonker: Yeah. Thank you for having me. Ted Jacoby III: Thanks, guys. Thanks, Serena. Thanks, guys. Jamie Jonker: Thank you. Thank Sarah Olson: you, Serena. Jamie, thank Jamie Jonker: you. Yes, see you. Bye, guys. Ted Jacoby III: Coming up next time. Scott Briggs: Yeah, the US is really in a great position to drive global dairy markets over the next five to 10 years. Ted Jacoby III: Tune in next time when we have Scott Briggs from Bridgescape Commodities joining us, talking about milk production on the global scale and how the US is positioned to be competitive against the major global exporters moving forward
• 
  Is Protein a Fad, and Is Cheese Still King? 22.05.2026 26min

  Right now, high-protein diets are hot and cheese is still the biggest user of U.S. dairy. But will it last? Listen now Listen to the episode Also available on: Amazon Music Apple Podcasts Spotify YouTube In this episode: In this episode of The Milk Check, we pull out our crystal balls and try to see into the future of U.S. dairy. Why GLP-1 may be a catalyst, not the whole protein story How health and wellness trends are reshaping dairy demand How exports could change the future of cheese demand The consensus? Find out in The Milk Check episode 100: Is Protein a Fad, and Is Cheese Still King? Got questions? We’d love to hear them. Submit below, and we might answer it on the show. Ask The Milk Check Transcript: Ted Jacoby III: [00:00:00] Coming up on the Milk Check. The debate is: have GLP-1s changed dairy forever? Our second debate is will cheese remain king? Welcome to the Milk Check from T.C. Jacoby & Co., your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I’m Ted Jacoby. Let’s dive in. Ted Jacoby III: Excited for our topic today. We are going to have a debate. The debate is: have GLP-1s changed dairy forever? The demand for protein right now is clearly extremely strong. It’s really a question of whether we think this demand for protein is a fad, or we think it’s a fundamental shift in demand that’s gonna be with us for a long time. And so I’m gonna actually put Mike Brown on the spot first. Mike, has GLP-1s changed dairy forever? Mike Brown: It certainly changed me forever. And I’m a big eater dairy for a long time. I’ve had good success with GLP’s getting my weight to where it needs to be, and one thing you do discover is that you do need to really watch your protein intake. You need to make sure you’re getting adequate amounts because you will lose muscle. I think diets in general, we’re becoming less carb-focused. We’re becoming more protein-focused. So, I don’t see it going away. Does that mean we’ll have the record-high prices we have now forever? Probably not the markets will stay strong, and I think it’s a shift in consumer demand . You just need to go into any Costco or Sam’s Club, and the amount of protein beverages they offer now versus three years ago, they’ve tripled in some cases. So, it’s definitely a market of strength. And despite the high price of proteins, people still seem to be buying it. I’ll see limits when there’s sales in different stores, which tells you that demand is still extremely strong. Ted Jacoby III: Josh, I’ll ask you next. Are we changing demand forever, or is this a fad? Josh White: I don’t know that GLP-1s are necessarily what’s changing demand forever, but they definitely are a catalyst and a disruptor right now. We were listening to a HighGround Monthly Update earlier today. I’ll echo something that was said during that update: A health and wellness trend [00:02:00] is absolutely happening, is global. They noted and cited in that, that over the last two years, gym memberships have been up in the U.S. If you go to other parts of the world that we export products to that GLP-1s haven’t yet reached, we’re seeing incredible health and wellness movements and protein consumption uptake. So, what I think the GLP-1 aspect of it is doing is that it served as a bit of a catalyst and ignited this market and forced us all to recognize this shift that we’re seeing from just calories taken in to quality of calories taken in, and that is driving a lot of incremental protein demand that the dairy space is a benefactor of to date. So, I don’t know if I really answered it, Ted. I think GLP-1 is a catalyst in forcing us to recognize a bigger trend that we’re seeing, not only in the U.S., but globally. Jacob Menge: I do think it’s pretty important to talk about the time horizon that we’re discussing because there’s a really big difference in both availability and dietary preference of protein sources globally, right? Like India, Sub-Saharan Africa, even China up until very recently was very plant protein-based. And so, even though protein consumption as a whole has certainly been growing where you are looking at depends on how much that’s actually impacting animal proteins. And so, I think that time horizon is important, right? Because we know where population growth is occurring worldwide. Population growth worldwide is actually in areas that are plant protein consumers not animal protein consumers . And you’re getting some animal protein consumers actually trending lower on population, right? You look at the population outlook for a lot of Europe. Korea was in the middle. I think they’re, like, 50/50, if I recall, on plant versus animal proteins. But I think that time horizon is a pretty important piece of the discussion. Ted Jacoby III: So Jake, I’ll ask you the [00:04:00] question. So, five years from now, are we gonna be looking back on 2025 and 2026 and talk about the whey protein fad, or do we think that we will have seen a fundamental shift in where people have invested their investment dollars in terms of what kind of dairy production facilities, processing facilities have been built in the U.S. and around the world? Jacob Menge: Five years is way too short of a timeline to see what I would call a freight train changing its course. And so, I think that’s pretty clear. We know what’s gonna be happening with U.S. exports, right? We are just set up to be the export powerhouse in the short term, and I would call five years short term for trends like this. Even though this has happened very fast, knowing again what is happening with the U.S. export picture, I don’t think there’s any way we see a material change in what’s happening in the protein space in a five-year period. Mike Brown: I think there’s one point of difference in milk proteins versus whey proteins. I think we see, because of cost difference, I think, more interest in finding, how can I use milk proteins in a product versus whey? I noticed this weekend, again, looking at a sports beverage that 30 gram protein, number one ingredient’s milk, and it’s not a fairlife(R) product. It’s an amalgamated product. Jacob Menge: Couldn’t agree more. I was certainly one level higher in just saying any dairy protein or animal protein for that matter. But yeah, when you drill down, do I think there could be shifts within that makeup? Absolutely. Mike Brown: The other thing is with whey proteins is that you gotta sell the cheese or you gotta sell the casein. And as we look at that spread in price, what’s that value of that whey protein worth versus what you get for the remaining part of the product? As we know, right now, Class IV, which is even dry milk powders and fat are worth way, way more than milk for cheese, even when you adjust for the higher protein revenues. We have a $5 spread right now between Class III and Class IV. And that always takes care of itself, but exactly how it will, I think we all know there’s interest in do I add casein-producing capacity so I [00:06:00] can get to my whey proteins rather than just cheese? If I make those caseins, where’s the market for those products? Where am I gonna be able to use them? So I think there’s lots of questions that we don’t know yet. ‘Cause if I’m a processor, one very high-value product, whether if it’s a half a pound or three-quarter of a pound yield per 100 pounds of milk, it’s not gonna drive all your decisions. It’s gonna be a factor. Ted Jacoby III: Gus, I’m gonna ask you the question: Has GLP-1 changed dairy forever? Or do you think it’s a trend? Gus Jacoby: I’m of the impression that we are certainly following the trends within Western culture to evaluate more and more the health benefits of eating better nutrition. And certainly, as time moves on, the protein component in your meal is going to be more and more important. So, I’m not going to take away from that. I think that will continue to evolve, but I also think that as we continue to evolve in that setting, other pieces of that nutrition will come to light and become the fad for a period of time. At the moment, protein is hot, and I don’t think we can get away from that. For me, just looking at U.S. milk production and how much of that milk production goes into cheese ,the ever-increasing demand in cheese, I don’t see that going away either. I think that’s an entrenched part of our society, and I think cheese is a pretty important part of the daily food consumption here in our culture as well.  I think there’s a place for both of them, and it’s hard for me to distinguish one from the other as being where we go as an industry. Mike Brown: One thing we may see is more of these protein-based dairy beverages that aren’t Class I milk take more and more of that consumer stomach. And so, we’re gonna see more of those UF-based products, which aren’t necessarily what we think of traditionally as fluid milk. And that’s where a lot of the growth has been: in the high-protein milks. Is that where the substitution will take place as much as in some other ways? Gus Jacoby: I don’t think there’s any doubt, Mike, but I would also argue that we’re probably going to eat into that Class I consumption a bit by more of this dairy protein shake, which tends to be in the [00:08:00] Class II area. Mike Brown: Yeah, that’s, and that’s what I, that’s what I meant. Yeah. Okay. If you’re gonna drink it as a Class II product, it all gets down to how regulation basically makes those products more competitive- Yeah … because of the regulated minimum price. Gus Jacoby: That would be a very Interesting discussion probably for another day relative to- what we wanna cover in our debate today. Mike Brown: Yeah. It’s a bit of a nerd fest, But we look at consumption trends, it isn’t hurting the high-protein products because they are priced differently. Gus Jacoby: Yep. Ted Jacoby III: Diego, what are your thoughts? This demand for protein: fad or a long-term trend? Diego Carvallo: I think the trend is clear, and it still has a lot of room to grow. So, I think in a five-year period, it’s very easy to say that they’re gonna continue to grow. Ted Jacoby III: You see the international space a lot more clearly than most of the rest of us. What’s happening here in the U.S., is it happening internationally as well? Diego Carvallo: Yes, and that’s why I said that there’s gonna be growth ’cause I still see areas of Latin America where that trend is just getting started . You still do not see any of the products that you’re seeing in the U.S. at the supermarket showcasing and showing marketing that much the protein content on the end product. So I think that growth is still getting started. Ted Jacoby III: Joe, last but not least, fad, long-term trend? Joe Maixner: I think that the consumer shift is a long-term trend. I don’t know if necessarily the GLP-1 is the long-term trend because technology will continue to advance, and there’ll be something that comes out at some point that makes this old news. I think that the health and wellness trend is certainly here for the foreseeable future. estimating 40 million people within the next five years are going to be on GLP-1s. That’s a big number. The one thing we’ve seen the effect on selfishly for my market is the amount of cream and fat that it’s spun off because of all the demand for the protein. We did not expect to have this fundamental shift in the fat market domestically this quickly. Unless the farmers decide that they’re gonna change how they feed their cows and produce less fat, we’re gonna see that for a while too, and we’re gonna be surplus fat. And that [00:10:00] product is also affected by this GLP-1 because people tend to eat less sweets and snacks and fat-heavy products, so consumption’s been down on that side as well. Ted Jacoby III: It’s gonna be interesting. And I’ll just give my two cents. I do think the demand for protein is a long-term trend. I think it’s a trend both within certain segments of the population and I think it’s a trend in that I think, just comparing my generation and how I ate and drank in my 20s compared to how my children eat and drink in their 20s, they sure do live a healthier life than I did when I was that age. I think I’m speaking for a good portion of that generation and not just my kids. So, we’ll see. It sounds to me that the consensus is pretty clear on this one. Whether it’s GLP-1s or not, this protein trend is a long-term trend, and it is fundamentally changing the dairy industry. And we’re all curious to see how it’ll play out. All right, now I’m gonna switch to our second debate. This debate is will cheese remain king? So in my lifetime, milk production, when I was born, milk production was roughly 20% of milk was made into cheese. Today, it’s 55%. It is very clear that the driver in dairy consumption in the United States is a per capita increase in cheese that is part of a long-term trend. My question for everybody today is: Have we started to reach the point where that trend is starting to plateau? Is cheese still king? Will it continue to be the driver of increases in per capita dairy consumption, or have we reached a point where we’re not going to see cheese driving the bus anymore? It’s 55% of milk production goes into cheese today. Is it gonna be 65% in 10 years, or is it still gonna be in the 50s? Gus, I’m gonna throw you out there first. What are your thoughts? Gus Jacoby: I think it’s hard to say that it isn’t still king considering the large amount of milk in U.S. milk production that goes into cheese. And even with respect to the protein segment that we just talked about, you can’t make whey [00:12:00] without making cheese, so you’re not gonna get whey protein without cheese. I don’t think the American consumer is going to lose their appetite for cheese anytime soon. I understand that certainly with the GLP-1s we’re gonna eat a bit healthier. But I find it hard to believe that while maybe the growth might become less than it has been over the last number of years I do believe that cheese is gonna be with us as the majority taker of milk at least for the foreseeable future. Ted Jacoby III: Do you think the trend is strong enough that 15 years from now 65% or 70% of all milk goes into cheese? Or do you think maybe we’re gonna plateau right around here at 55%? Gus Jacoby: I think it still has room to go a little bit higher. I think there’s a possibility of plateauing, though maybe at some point north of 60. But at the end of the day I just don’t see how it can be removed from the diet. If people wanna start playing with what type of cheeses are in their diet for better health benefits, I guess that may happen. Ted Jacoby III: All right. Gus Jacoby: Not in the near term. Ted Jacoby III: Jake, what are your thoughts? Jacob Menge: I would imagine that the percent of milk that is turned into cheese goes lower. That’s my gut feel. We’re gonna be export-dominated. We maybe can capture some markets that we haven’t historically gotten into before with more shelf-stable products. We’re just gonna have to export a lot of product. And cheese is exportable obviously, but it just feels, with the new markets we’re gonna be moving into, the amount of product as a percent that we’re gonna be exporting, dietary shifts, it all points to me that, as a percent, it’s hard for me to make the case that cheese goes higher. And so by default , I’ll argue it goes lower. Ted Jacoby III: Joe, what are your thoughts? Joe Maixner: I think that what happens with cheese moving forward depends on how well the dairy industry markets cheese moving forward. If we do a better job of [00:14:00] marketing the protein benefits, the fact that it’s the cheapest protein per gram and playing into those strengths that would help keep it as king and increase consumption. If we continue to sit on our laurels and not really do any additional marketing, I think that we have a chance to lose capacity. Jacob Menge: So what’s your gut? Do we do a good job marketing it or not? Joe Maixner: Okay. I don’t think we do. But we could. The potential is there. We just, we’re not doing it. Ted Jacoby III: I think dairy has struggled for a long time just to market itself as how healthy it is, and some of that I think is because we sit in a position of strength in the marketplace, and so everybody’s always coming after dairy to say they’re better than dairy and dairy’s got issues. So all the plant guys can grow their plant-based products. All of those food products that don’t come from dairy tend to attack dairy in order to grow their own market share. And I think that’s why dairy struggles. I think your point about how the value of a gram of protein in cheese is a lot less than the same cost of that protein, let’s say, in whey powder or in other things. I’m curious to see how that plays out, because I think it’s a really good point. Mike Brown: I’d make a point on the competition. Where we’ve seen shrinkage in the refrigerator dairy case is the non-dairy beverages. They are losing market share. Milks are doing better, particularly the protein milks, are doing so much better. I think there’s still potential, so we can’t assume that. I also think there’s two questions on cheese to me: market share and total market. I think total market still has a little room to grow. I think market share will not grow, maybe decline modestly, and that’s more because of the Class II demand for proteins now with yogurt, Greek yogurts, and cottage cheese, and all the Class II-based liquid beverages. So, it’s more of an issue perhaps of market share, and that takes time to build capacity. We all know that. But the demand is there. Cheese is gonna continue. We [00:16:00] look at the supermarket sales data, it’s still growing modestly, as is butter, and that’s just total sales. I think the other factor we gotta think about here is population growth because our growth’s gonna be much slower. With current immigration policies, I don’t see a quick turnaround in growth of population like we’ve experienced in the past. A lot of that from folks who are big users of dairy in their diet. In the benefit of cheese, as we get older, we drink less, and we eat more milk proteins, and that’s part of our growth, of course, with cheese. The other one is food service. It’s huge, particularly the mozzarella side of the business, and it’s looking pretty tepid right now. That tends to go with health of the economy. I expect it’ll rebound again when people have more money to spend. I think that’s part of it, too. So, cheese is gonna remain strong. Jake made a very good point, though, as did Joe. It’s kinda sold itself, and we’ve had no trouble selling it. We are now the export market, kinda like we did with non-fat dry milk, what, 20 years ago, Josh? We’re, and we’re dependent on that export market. So, it makes us more vulnerable to world price, term, but it also means it’s a chance to grow if our industry adapts to meet those demands. And as we see, everything from powders to butter to cheese, the industry is working on that. But it’s a slow process, ’cause it’s always been that market when we have a little extra it was an opportunistic market, now it’s becoming part of sales strategy, and that’s a very different way to look at your business. Ted Jacoby III: Yeah. It means It’s really matured. Mike Brown: Yes, a lot. Ted Jacoby III: Diego, what are your thoughts? I know you’re not the cheese guy, you’re more of the ingredient guy, but internationally, cheese is definitely growing. Cheese gonna remain king? Or is the other protein sources gonna take over and pull milk away from cheese? Diego Carvallo: So I have contradicting thoughts here. I think that everybody here agrees that the demand for WPCs and WPIs is gonna continue growing, and that’s definitely been making cheese plants very profitable . But at the same time, I’m seeing that many cheese plants being built in the past few years that I think that [00:18:00] the competition is gonna get fierce in that aspect. I would say in the coming years, I see more probabilities of people who build, and companies who build dryers, for example, for non-fat and skim , to have an advantage and definitely a good incentive. Ted Jacoby III: So my two cents is this: I think we are underestimating how much the export demand for cheese is gonna keep driving it. There’s a lot of proof that cheese consumption in developing countries tends to follow a generation or two after milk powder consumption. It starts with infant formula, then tends to stay in the diet as they get older, and eventually manifests itself in cheese, mostly as an ingredient in something like pizzas or burgers, et cetera. And so, I do think cheese demand for cheese out of the U.S. will continue to grow. I do think the curve will flatten a little bit. I also think that you are going to get a continued pressure to build more cheese plants just so you have access to the whey protein, because I think the whey protein is gonna maintain its value. But I’m a little bit like Diego, ’cause on the other side, one of my thoughts is I hear a lot of conversations lately about instead of making cheese, what if we make micellar casein and we pull the native whey, and then we dry the native whey separately? So, I can also see technology continuing to evolve where maybe you don’t actually need to make cheese in order to have access to the whey proteins, and I think we have to keep our eye on that. But I do think cheese is the dominant use for milk in the United States. I don’t see that changing anytime soon, but I do think the trend is probably gonna start to slow down a bit. Josh? What are your thoughts? Josh White: I’m gonna step back a bit and start with one belief, and that belief is that United States dairy economies of scale have now reached a point where we’re gonna grow in our market share for the global dairy consumption. We’re gonna continue to grow in our participation in that business, and we will capture more market share. And if you believe that, at its core, cheese is maybe one of the… If not, it’s the most calorie-dense product that we have. [00:20:00] And there’s an argument that it goes into products as both ingredients and as the primary food service or retail product, which accesses a lot of different demand potential. If you think about the cheese factory, maybe not how they’re run today, but if you think about it, I’ve made the mistake multiple times of saying that we’re gonna start balancing to cheese, and there’s been a big argument about that, internally. And I can understand why there’s an argument on the surface level. But in the bigger picture, it’s what may be the most versatile way to process milk and balance out whether we have extra protein, extra fat, or we’re short of either of those product or whatnot. You can spin off more cream. You can bring in more solids. You really optimize that recipe, and I feel like that makes it foundational. And if it’s foundational, you’re gonna continue to see investment in these large cheese plants. If whey protein’s hot, great, whey protein benefits, and cream prices are poor it’s offsetting . If cheese demand globally is growing or fat demand’s growing, great we’ll maneuver our recipe a bit to take advantage of that. It feels very… Optimized maybe is not the right word. Someone help me with a word for it. But it feels like it’s a natural hedge, and it just seems if we’re gonna continue to grow in the commodity foundation of dairy products and then optimize all the ingredients and all the special opportunities around it, the cheese processing facility is maybe going to be the best to build around. And so with that in mind, I don’t know if that necessarily takes a greater market share, but it’s gonna be the foundation for our growing volume of milk solids out of the U.S. over the next several years. Ted Jacoby III: Josh it’s funny, you mentioned, are we gonna start balancing into cheese versus balancing into a powder plant? And my initial reaction when you first mentioned it a year or so ago was to say, “A cheese plant is just way too expensive.” It’s two, three times the cost to build a cheese plant as it is to build a plant that [00:22:00] dries non-fat. But the more I thought about it, the more I started to realize this: Already today we’ve seen a fundamental shift, and it will continue. I think cheese will always get enough milk to run the plant, but the competition for that marginal next pound of milk that could go to any of those plants, I think the competition for that last pound of milk has been ratcheted up a notch or two, and I don’t think cheese is gonna win that battle at all costs, like it historically has. And so I think there are times when your UF milk plants, when your ESL plants, and even when your non-fat butter plants are gonna win that competition from time to time. And so, the balancing function for a milk supply is gonna start getting spread over the course of multiple plants rather than the way we’ve been over the last 50 years, where everything was balanced in and out of a milk drying plant. All right. So have we decided? Have we come to a conclusion? Is cheese king? Let’s just go around. Is cheese gonna stay king? Mike, is cheese gonna stay king? Mike Brown: Cheese will stay king, but the strength of its kingdom will be a little weaker, ’cause it’s gonna have some strong competition from other proteins. Ted Jacoby III: Perfect. Jake? Jacob Menge: Couldn’t have said it better. Agree completely. Yep. Ted Jacoby III: Gus? Gus Jacoby: I would agree with how Mike said it. Yeah. Ted Jacoby III: Awesome. Joe? Joe Maixner: Yeah. No, no argument here. Ted Jacoby III: Diego? Diego Carvallo: I’ll have to say no. It’s because of the high competition and the amount of plants that are being built right now. Joe Maixner: Yeah. Ted Jacoby III: So are you saying you agree or disagree? Diego Carvallo: I disagree. Mike Brown: It’s the degree that cheese is ahead; it’s gonna take a lot of time for that to shift. Ted Jacoby III: A little bit like the Roman Empire in the year 200 AD, it’s still got 250 years to go, but it’s no longer gonna be the powerhouse it was 50 years previous. Josh, what do you think? Josh White: Yeah cheese is the king, and we’re gonna build a bigger kingdom around it. Ted Jacoby III: All right. And I agree with the general consensus that the cheese stays king, but the trend of an ever-increasing percentage of the supply is starting to slow down a bit. All right, everybody. Hey, this was a great [00:24:00] conversation. Thanks for joining us today. To all of our very valued listeners, we thank you for taking the time to listen to us. And if anybody ever has any questions about some of the topics we talk about, don’t ever be afraid to reach out and contact T.C. Jacoby & Company. We’re always happy to help. Take care, everybody.
• 
  Volatilidad, leche y mercados globales 15.05.2026 21min

  En este episodio de The Milk Check en Español, Diego, Yara y Miguel analizan uno de los mercados lácteos más inciertos de los últimos años. El equipo conversa sobre la limitada disponibilidad de leche en algunas regiones de Estados Unidos, la fuerte demanda de leche ultrafiltrada, el sólido mercado de exportación de quesos y por qué el mercado de leche descremada en polvo sigue desconectado de los fundamentos tradicionales. También hablan sobre el incremento en los costos de flete, la creciente necesidad de SMP en México, el cambio en el comportamiento de compra de los clientes al construir inventarios de seguridad y cómo las tensiones geopolíticas, negociaciones comerciales y la volatilidad global están impactando los mercados lácteos alrededor del mundo. Desde NFDM y quesos hasta fletes, futuros y comercio internacional, este episodio cubre los factores más importantes que están definiendo el mercado lácteo actual. ¿Tienes preguntas? Nos encantaría escucharlas. Envíalas abajo y podríamos responderlas en el pódcast. Pregúntale a The Milk Check Diego Carvallo: Buenas tardes a todos nuestros queridos clientes y, proveedores. Los saludamos desde la ciudad de San Luis, donde estamos Miguel, yo, y Yara esta semana reuniéndonos con el equipo para reuniones de estrategia y análisis de mercado. Y bueno, bienvenidos al pódcast de esta semana. Estamos a mediados del mes de mayo con muchísima incertidumbre, muchísimas, eh, comentarios y preguntas sobre el mercado. Yara Morales: Sí, saludos a todos. Miguel Aragón: Así es, sí nos estamos reuniendo aquí en nuestra reunión trimestral, viendo, tratando de, ver la bola de cristal, pero no, no, no, no, está, está- no aparece, no aparece. Yara Morales: Sí, yo creo que las mismas preguntas que nosotros tenemos las tienen todos los clientes y los proveedores también. La verdad, es una incertidumbre todo lo que está pasando con el mercado. Es un año de verdad muy a-atípico, muy diferente a todos los años. O sea, ya, ya muchos clientes hasta nos dicen: «Pues ya no me sirven las referencias que tenemos de todos los estadísticas que teníamos anteriormente». La verdad, ya no, no. Ha sido un año muy difícil para todos. Así es. Diego Carvallo: Si quieren, podemos comenzar hablando un poquito de, de la parte de fluidos y después pasar a, a los productos. Eh, así entendemos un poquito cómo, cómo se sienten los fundamentos. Em, bueno, hemos tenido varias reuniones con el equipo de fluidos y, eh, a pesar de que el número de producción de, de leche de Estados Unidos sigue estando bastante bien, eh, seguimos teniendo un crecimiento bastante sano en la producción de leche, em, estamos viendo, eh, que para el medio del spring flush, que estamos actualmente, no pareciera haber sobrantes de leche, eh, a descuentos tan significativos como lo que había en los años anteriores. Y, eh, eh, la verdad es que ha creado algo de, eh, dudas, algo de preocupación, sobre todo para el equipo de fluidos, porque en estos momentos usualmente estamos viendo la, las cargas de leche descontadas a, a unos descuentos muy importantes y este año no ha sido el caso. Entonces, eh, hay mucha discusión y mucha, eh, como conversaciones sobre la demanda, sobre todo la demanda de lo que son, eh, las cargas ultrafiltradas, que está muy, muy fuerte esa demanda y pareciera que las plantas todavía tienen más capacidad para absorber leche. Em, por el otro lado, la parte de la crema sí está bastante larga, hay bastante producto disponible, pero lo que es la ultrafiltrada y la leche líquida, pareciera que con toda la capacidad nueva que agregamos este año, em… Hay suficiente planta para absorber ese crecimiento. Miguel Aragón: Así es, así es. Eh, un comentario importante que nos hacían los-nuestros compañeros es el de que en estos tiempos las– usualmente las cargas se compran o se mueven a descuento y este año no, se están moviendo a la par, lo cual está causando una incertidumbre bastante alta en el mercado. Diego Carvallo: Si, si ese es el caso ahora en el pleno flush, pues el mercado debería sentirse muy ajustado una vez salgamos del flush. Exacto. Y entremos en periodos de baja producción. Miguel Aragón: Exactamente. Eso lo, lo estamos empezando a ver en, en, en el mercado de futuros, eh, por lo pronto en el lado de lo queso. No sabemos qué tanto se ajuste, pero nos da algo de, de, de pausa ahí de- Sí. Yara Morales: Porque si siguen, este, mandando la leche para la clase uno, que es para toda la leche fortificada, para lo que es el, el, el yogur griego y, y lo que es el cottage, pues la verdad es que mucha leche se va a ir para allá. Eh, va a estar todavía muy escasa. Clase uno y clase tres. Diego Carvallo: Clase tres. Mhm. Exactamente. Clase uno y clase tres. Es importante aclarar también que e-e-ese panorama que estábamos describiendo es sobre todo lo que es, eh, al este de las montañas, de los Rockies. Todo lo que es California y la costa oeste, sí tengo entendido que hay bastante leche. Hay bastante leche. Que la leche sigue bien larga. Sí, así es. De hecho, uno, ayer coment– eh, estaba en plática con un-uno de nuestros proveedores y nos decían que tienen suficiente leche para las plantas de queso, en, por lo menos en California. Eh, y lo que comentabas, Diego, definitivamente esto se está viendo para el lado este y para el, el, de hecho, plantas en el centro del suroes– en el sureste. Sí, sí. El caso de la costa este ha estado muy ajustado de hace muchos años. Bueno, este año, eh, ese nivel, ese tightness, esa falta de leche, se ve aún más, eh, pronunciada. Em, bueno, con eso podemos entonces hacer como un, un cambio y empezar a hablar un poquito más de los, de los subproductos. Eh, Miguel, ¿quieres hablar un poquito de la parte de quesos antes de entrar en, en los polvos? Sí, sí. De hecho, ah, es, el– aunque el mercado doméstico sigue teniendo suficiente producto para la demanda que tenemos, el mercado de exportación es completamente otro tema. Eh, más que u– esta semana estamos viendo algo de movimiento en los mercados de Asia y, este, y Oceanía, con la, una demanda que se está incrementando. Miguel Aragón: Ojo, cuando eso es, esos mercados se llevan bastante producto. Habían estado algo dormidos, eh, las últimas Seis semanas, ocho semanas. Pero estamos viendo que ahora al parecer la están ya buscando producto otra vez. Eso tal vez nos va a poner algo de, de restricciones de producto para México, Centroamérica, Suramérica, porque al parecer lo pagan mejor, eh- Estados Unidos es el país más competitivo en este momento para lo que son quesos, ¿no? Sigue siendo el más competitivo. Así es, así es. Aunque hay algo de, de sobre todo mozzarella, de, de, de– hubo algo de producción en Europa, pero no, seguimos siendo los más competitivos, Diego Carvallo: sobre todo en los cheddar. Ya, ya, ya. Okey, interesante. ¿Y si están viendo, eh, en lo que va de año un aumento en todo lo que son exportaciones a esas regiones? Sí, todo, Miguel Aragón: sí, los, los mercados a los que hemos exportado siguen creciendo, sigue creciendo la demanda. Eh, aún no podemos ver, eh, cómo, se desparrama la demanda o cómo, cómo se– cuándo es más demanda y menos demanda, porque ha sig– ha seguido creciendo constantemente. ¿Y Diego Carvallo: cuál es, eh, tu outlook para el resto del año? ¿Estás– tú sientes que el mercado ha conseguido un soporte bastante claro y que la demanda puede mantener los precios actuales o, o sientes más bien que en algún momento podemos volver a caer? No, la, creo que Miguel Aragón: estamos en un, en un, tenemos un piso. Ya. Y aunque hemos creído que vamos a estar en un rango, al contrario, creemos que tal vez, eh, el mercado empiece a tratar de, de, de, de subir un poco, de apuntar para arriba- De romper esa resistencia. De romper esa resistencia hacia arriba. Pero, ah, todo depende cómo, cómo siga la demanda doméstica, porque eso es lo que nos va, nos va a marcar Diego Carvallo: la pauta. ¿Y el tema de la guerra en Irán está afectando en algo la demanda de los clientes de ustedes en el sureste asiático? Miguel Aragón: Definitivamente, definitivamente. De hecho, tuvimos algo de cargas nosotros que, que anduvieron dando vueltas. Hasta en la India teníamos cargas que, que iban a, a Arabia Saudita, eh, y nos, nos afecta a nosotros, pero está afectando a todos los productores también. Eh, y es un mercado por varias cosas. U-una, porque no podemos entrar, pero otra, la más importante, es porque las aseguradoras no nos están asegurando las cargas que van para ese mercado. Nadie las asegura y si no las aseguran El mercado claro no puede, no puede tomarlo, no puede tomar ese producto Es demasiado riesgo. Ya, Diego Carvallo: ya, ya. Miguel Aragón: Imagínate Yara Morales: el transporte, cómo se está incrementando también Diego Carvallo: con todo eso. Eso es lo siguiente, eso es lo siguiente. Es un tema que vamos a hablar también, que está afectando sobre todo a los productos más económicos, porque representan un porcentaje más alto del, del costo del producto. Sé que ahorita todo el mundo quiere hablar mucho de nonfat, así que si quieren pasamos un poquito a hablar ese tema- Nos dedicamos al nonfat. Que es el más complicado en este momento. Eh, mira, en pocas palabras, yo diría, en este momento estamos viendo un mercado que está de cierta manera desconectado entre lo que es lo, lo que estamos viendo en los fundamentos con lo que estamos viendo en la realidad del mercado físico. Los fundamentos, eh, apuntan y todos los reportes del USDA apuntan a que hay un crecimiento en la producción de nonfat, hay un crecimiento en la producción de SMP y hay inventarios relativamente sanos. Sin embargo, lo que estamos viendo en el mercado spot, en el mercado actual, es algo bastante distinto. Y puede ser por algunos factores como los de los recalls que tuvimos, eh, ¿cómo se dice un recall en español? La- Reclamos. Un reclamo de producción que tuvimos durante los últimos meses que ajustaron el mercado, pero la realidad es que el mercado spot, el mercado físico actualmente sigue estando sumamente ajustado. Hay muy poco producto, la mayoría de las plantas siguen completamente sobrevendidas. Eh, los traders y revendedores tienen muy poco inventario en mano. Y también vemos ese mismo patrón desde el punto de vista de los clientes. La mayoría de los clientes siguen todavía bastante cortos de producto y necesitan may-mayor, mayor volumen para saciar sus inventarios de seguridad y su producción. Entonces, eh, yo diría, en el corto plazo todavía vemos un mercado bastante bien sostenido, pero creemos que una vez pase el spring flush, después de estos dos próximos dos meses, deberíamos ver una mejor correlación entre lo que es el mercado físico o el CME Cash y el mercado de futuros. Y creemos que principalmente el CME Cash debería hacer gran parte de ese trabajo para llegar a un nivel más cercano a donde están los futuros. Es decir, creemos que debería haber cierta, eh, corrección y consolidación en un nivel posiblemente cercano a, a los cuatro mil quinientos, cuatro mil seiscientos, para de ahí poder buscar, eh, opciones de moverse para más arriba o mantenerse firme el resto del año. Sí somos, eh, creyentes de que el resto del año el polo va a seguir bastante ajustado, pero no creemos que nos podamos mantener en los precios que estamos actualmente, que son dos dólares treinta por libra, que es un precio en el que ya empezamos a ver que la demanda se frena un poco Okey. Em, todo lo que son MPC, eh, MPC setenta y MPC ochenta han seguido mucho ese patrón en el que el mercado está muy ajustado, no hay suficiente producto y hay mucha demanda que ha venido de sports nutrition, de otras aplicaciones a buscar, eh, sustitutos en el mercado del MPC. Em, Yarita, cuéntanos un poquito cómo has visto tú la demanda, cómo has visto a tus clientes en México, eh, ¿cuál es la expectativa de mercado desde el punto de vista del cliente mexicano? Yara Morales: Bueno, la, la verdad es que con toda la escasez que hubo en los primeros meses y que no podíamos surtirles la leche, porque todos los proveedores nos agarraron sin inventario y a México lo agarraron sin inventario. Afortunadamente, ya a partir de marzo, abril, ya empezaron a recibir producto. Entonces, ahorita los clientes en México tengo entendido que ya tienen un poquito más de inventario. Aparte, pues están cerrando contratos, eh, se está comprando SMP de, de Europa, los que tienen cupo y el producto va a empezar a llegar ya en mayo y son precios más competitivos. Los precios tan altos, los, eh, clientes finales, pues obviamente tienen una resistencia ya a pagar estos precios tan altos y empezaron a utilizar la leche fresca, que había bastante, ¿verdad? Este, podían encontrar hasta de cuatro pesos por litro. Ahorita ya no hay, se está escaseando. Todo el norte de México, ya la leche fresca está escaseando demasiado. Ahorita hay un poco más en el centro, que es donde también hay bastante producción de leche fresca, pero va a llegar el momento, como ya a finales de junio, julio, que empieza a escasear la leche fresca. Entonces, definitivamente va a haber una necesidad de leche descremada. Aparte de las formulaciones, pues ya las tienen con la leche descremada. Y la verdad es que todavía sigue habiendo, este, demanda. Ya no igual como en un principio que estaba todo mundo desesperado tratando de conseguir y recibir algo, pero de cualquier manera sigue la demanda, sigue todavía los clientes tratando de conseguir producto. Diego Carvallo: Y es difícil que no vengan a comprar a Estados Unidos. Por eso, por eso yo soy de la creencia que el mercado se va a mantener bastante firme por el resto del año, porque las importaciones de Europa sabemos que va a ser un volumen limitado, menos de diez mil toneladas, posiblemente para todo el año. Eh, si hay poca leche bronca en México, no van a tener otra opción que o, o consumir menos o, o venir a comprar a Estados Unidos, en pocas palabras. Entonces, eh, sí, yo creo que eso debería dar soporte. Debería marcar al menos un piso en los precios de, del nonfat. Quería Miguel Aragón: a-adherir un poco una reseña. En el– ahora que estuvimos en Chicago atendiendo el ADPI, estuvimos juntas con algunos, ah, productores de, de, de comida aquí en Estados Unidos y nos comentaban algo que tal, tal vez quisiera ver ustedes qué opinan. Eh, muchos Yo era de la creencia que nada más en México compraban al día, por decirlo así, y, y no había contratos largos. Resulta que en Estados Unidos era la misma situación y con varias de las empresas que nos juntamos nos dijeron: es que ahora estamos tratando de decidir si contratamos toda la segunda mitad del año, eh, a estos precios o nos esperamos. Es la gran cuestión ahí con las empresas que estuvimos platicando dentro de Estados Unidos. Y eso era nonfat Diego Carvallo: también o queso también. Nonfat. Ajá. Principalmente. Nosotros hemos visto exactamente ese mismo patrón. Los clientes en Estados Unidos tenían inventario al día, tenían una carga de, que tenían que utilizar esta semana y a la semana siguiente les llegaba otra carga y no tenían inventario. Ahora la tendencia es comenzar a construir inventario de seguridad, proteger para al menos dos o tres meses para protegerse de que una carga esté demorada o que no haya producto. Así es, exactamente. Miguel Aragón: Creo que Diego Carvallo: es una reseña muy Miguel Aragón: interesante Diego Carvallo: que, no la había Miguel Aragón: visto yo Diego Carvallo: y se ve ahora. Y eso resulta en demanda adicional, porque eso a la final, cuando todos los clientes de Estados Unidos, muchos, tratan de crear inventario de seguridad a la misma vez, cuando el mercado está muy ajustado, crea un crecimiento en la demanda que no es artif– no es orgánico, pero sí crea una subida en la Miguel Aragón: demanda. Así es. Y creo que alarga esta, esta cuestión que estamos viendo ahora. Está ajustado. Sí, Yara Morales: y lo hemos estado viendo con los clientes de México, los queseros, los que tienen plantas de queso, que han querido cuando menos tener la seguridad de que van a tener el producto, por eso pagan los precios. Entonces, han estado comprando con precios hasta meses adelantados. Y es, y era algo que no se veía. ¿Por qué? Pues porque estamos tan cerca que pueden llevarse el producto, pues en una semana o dos semanas y ya tienen la leche. Pero ahorita con esta escasez, pues la verdad que prefieren cerrar contratos largos, aunque sean meses más adelantados. Diego Carvallo: Correcto, correcto. Un punto también importante mencionar es el costo, cómo está afectando el mercado los altos costos de combustible y de flete, sobre todo para productos económicos. Hace poco estuvimos cotizando algunas cargas de permeato a México y a diferentes partes de Asia, y el costo del flete ha subido muchísimo. Eh, es algo que también está afectando a muchos clientes y viene dado a raíz del conflicto en Asia. Eh, ¿cómo está afectando eso a, a su, a la demanda de queso? Miguel Aragón: Definitivamente nos está afectando porque en, en, como saben, manejamos, eh, tres líneas de queso nosotros. Manejamos el queso de primera, eh, que tal vez es el que no, no refleja tanto, eh, el, el incremento en flete, pero lo refleja, pero lo puede absorber un poco más. Pero en el producto, ah, grado B que decimos nosotros, que se supone que era un poco más barato, eh, sí le afecta porque es un producto más barato. Y ahora el producto, eh, que manejamos para reproceso, que es el producto barato, es el producto para extender la proteína en el queso, eh, para hacer más queso, sobre todo queso análogo, ahí sí se sintió fuerte el i-el impacto del flete, porque a veces son– o sea, ha subido cuatro o cinco centavos por libra de diferentes lugares. Depende de, depende de la geografía de Estados Unidos, de donde estemos mandando el queso y es donde más nos ha afectado. Totalmente. En el Diego Carvallo: producto más barato. Igual que- Y, y no solo es en fletes marítimos, sino en fletes terrestres. La parte del transporte en camión en Estados Unidos ha subido mucho. Nosotros solíamos pagar cuatro o cinco centavos para mover una carga de California a El Paso. Hoy en día ese precio está cercano a los seis, o sea, ha subido un cerca de un 20 % En, en la– cuando movemos Miguel Aragón: produ– movemos queso de, de, de Washington a, a El Paso, estábamos pagando trece centavos la libra. Hoy día diecisiete centavos, a veces dieciocho centavos. Y de-dependiendo también si, si se empieza a mover algo como de, digamos, de, del sur, de, de, del suroeste, cuando empieza a moverse mucho melón o cosas así, o cuando viene la temporada de árboles de Navidad, depende de la temporada, esto va, va a incrementarse aún más. Sí. Yara Morales: Igual que el refrigerado. El refrigerado se estaban pagando doce centavos y ahorita ya están cerca de dieciocho centavos. Entonces sí ha Miguel Aragón: subido bastante. Sí, sí, sí, nos está afectando en el queso, en la, en el movimiento del queso y en el movimiento de la mantequilla, definitivamente. Yara Morales: También. El Diego Carvallo: último tema que nos ha preguntado mucho la gente. Cuéntenos un poquito sobre el tratado de libre comercio y qué expectativas hay ahora que se vuelve a negociar entre Estados Unidos y México Bueno, Yara, tú ya has escuchado porque- La verdad, Yara Morales: hay mucha incertidumbre, hay muchas preguntas. Eh, ahora en junio que viene la revisión, pues, mmm, son varios, varios factores, ¿no? Se viene el, la revisión del Tratado de Libre Comercio y se viene el Mundial de fútbol en los tres países. Entonces todo el mundo anda como que muy alterado con todo eso, porque no saben, no sabemos qué es lo que vaya a pasar, no sabemos cómo se vaya a, a mover ese Tratado de Libre Comercio, si se va a renegociar, qué porcentajes pudieran darse o si vamos a quedar en cero, que es lo que todo mundo pretende, porque pues es la economía de México. La economía de México realmente necesita ese Tratado de Libre Comercio. Y, este, y yo creo que todos, porque para todos es un beneficio, ¿no? Inclusive para Estados Unidos. Entonces hay mucha incertidumbre, ¿no? La verdad, mmm, yo pregunto y ando investigando y todos mis clientes pues no saben qué es lo que vaya a pasar. Miguel Aragón: Así es. Y nos está… esta incertidumbre nos afecta día a día, eh, sobre todo con México por la cuestión del tipo de cambio, porque sale un encabezado y se dispara el dólar, eh, sale otro encabezado y se fortalece el peso. Es cuestión de todos los días, todos los días, este, y las, la cuestión política nos, nos, sí nos está afectando bastante. No, Diego Carvallo: no hay certidumbre. Miguel Aragón: Claro. Eh, pero una cosa superimportante que, que, que creo que está, eh, afectando algo lo del tratado y muchas otras cosas es que se nos vienen las elecciones primarias en, en, aquí en noviembre- Estados Unidos. Estados Unidos. Y a eso tú sabes que- Es muy importante. Es muy importante, porque hay que mover el, el, el, el, el, el, lo que piensa el público. Claro, hay que ganar los votos. Y hay que ganar los votos y aquí vamos a ver si se va a hacer cosas para, para tratar de tener algún efecto sobre eso. Y muchas veces no tiene nada que ver con México, Diego Carvallo: obviamente, también las de Irán, pero el mercado, básicamente, yo creo que va a mantener mucha volatilidad, va, va a haber mucha incertidumbre y, eh, las, las monedas van a tener, obviamente, como resultado una variación bastante violenta. Los bancos nos afectan. Exactamente. Yara Morales: Sí. ¿ Diego Carvallo: Qué otro punto importante? Definitivo, Yara Morales: definitivo. Ay, pues yo creo que todo esto es bien interesante. Vamos a ver qué sucede. Este, no sé qué otra cosa podemos Diego Carvallo: manejar. Voy a estar, yo voy a estar en Antad la próxima semana. Eh, lastimosamente, esta vez no me van a poder acompañar Yara y Miguel Pero yo voy a estar en Antalas, así que con mucho gusto, eh, me, me encantaría conocer y encontrarme con algunos de nuestros clientes estando allá. Así que no duden en, en contactarnos. Así es, así es. Desafortunadamente, Miguel Aragón: yo Diego Carvallo: no Miguel Aragón: voy. Sí. Ah, pero yo voy a estar en, en, en Alimentec, en Bogotá, creo que es. Entonces, si alguien nos está viendo en Colombia o que vaya a estar en Alimentec, por ahí estamos. Excelente, excelente. Que Yara Morales: por cierto también va a haber elecciones en Colombia. Miguel Aragón: También. Así es. Sí, Yara Morales: también va a haber elecciones en Colombia. Hay que ver cómo, cómo se- Más volatilidad. Se ve todo. Más volatilidad todavía. Más Diego Carvallo: gasolina al fuego, sí. Bueno, mil gracias a todos. Gracias, Miguel y Yara. Gracias. Gracias, gusto en Yara Morales: saludarlos a todos. Bye
• 
  A Market on Borrowed Time 05.05.2026 20min

  Nonfat is sitting north of $2.25 on the CME spot market. But the bigger question is how long it can hold. In the latest episode of The Milk Check, the Jacoby team breaks down a dairy market that feels tight, fragile and increasingly dependent on timing. Here’s what they’re watching: Why nonfat prices surged, and what could break them How protein demand is pulling milk away from dryers Why MPC and MPI are outpacing nonfat What the inverted futures curve suggests for the second half of the year How depooling and Class III–IV dynamics are shifting milk flows Why butter feels weaker, even in the middle of flush Plus, the team talks through what happens if the nonfat market doesn’t break soon. There’s still a lot of milk moving. Just not where it used to go. Let the Jacoby team help you get up to speed on the new dairy market dynamics. Click below and listen to The Milk Check episode 98: A Market on Borrowed Time. Got questions? We’d love to hear them. Submit below, and we might answer it on the show. Ask The Milk Check Ted Jacoby III: Coming up on the Milk Check. Jacob Menge: if this doesn’t start falling soon, I think there’s gonna be people that are trying to make money on the short side of this thing because they didn’t make money on the long side. Ted Jacoby III: Welcome to the Milk Check from T.C. Jacoby & Co., Your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I’m Ted Jacoby. Let’s dive in. Today is May 1st. It’s a couple of days after the ADPI and a couple of weeks after the Cheese Expo, and it’s usually after those two meetings a really good time to talk markets. So, we’ll go ahead and start with the market that everybody was talking about at the ADPI. Josh, Jake, Joe, what’s going on with our nonfat market? We’re at $2.26 today, I believe. Are we gonna stay up here for a while? Josh White: It’s a more challenging question than just the absolute price today. I think that if I were to summarize the show, there was a recognition across the entire dairy industry that there might be some legitimate reasons for nonfat to be tighter than they have been over the last several years. It feels like a lot of different things have resulted in the current spot price that we’ve seen today. Over the last five years, we globally have made more skim milk powder and nonfat. We’ve consumed more skim milk powder and nonfat, but the real story is in the fact that we’ve also made a whole lot more milk, and that milk doesn’t seem to have found its way to the dryer. Seems to have found its way to a variety of different products. And equally as important during the ADPI was the talk about the protein market, which I think we can likely get to later. But things like RDT products, beverages, protein consumption, cheese consumption, a lot of things have consumed incremental milk growth, particularly in the U.S., and that happened after many years where buyers had very little concerns over access to supply. And as a result, I think in the background we watched global inventories decline, and that all seems to have come to a head here in the early part of 2026. And now as we’re getting into the northern hemisphere flush, and particularly in middle America, yeah, then we have ADPI. And so, what’s interesting about your question is throughout most of the conference people were pretty convinced, “Yeah, we’re in a tighter nonfat market. We’re all buying into that.” Yet, the days following ADPI, we’ve seen futures sell off a bit and we’ve seen a little bit more volume traded at the CME spot call. What’s that mean going forward? Jacob Menge: The most interesting thing going forward is you don’t talk to single person that says these prices are gonna stick around for six months. And so it’s really a matter of timing, how long do we stay up here? I think we’re already up here longer than most anybody thought. And the other thing is, nobody got this market right. Some people got in at a buck 25. Those guys sold at a buck 40. They said, “I’m gonna take my 15, 20 cents and run.” And they felt like a genius for about three days before we were quickly at a buck 60. And we’ve got this really interesting dynamic of no market participant really happy with it being up here because nobody really made money on the way up. And everybody convinced that, okay it’s on the clock for when it comes off. And I’m not even gonna disagree with that, right? I don’t think anybody would argue that long-term we’re gonna have $2.50 nonfat in 2028 or whatever. But this really comes down to a question of timing, and I think that’s where you get mixed opinions. But in general, I think most people are of the opinion that it’s not gonna be that long before this thing does start to fall. I don’t have that strong of an opinion actually, but what I do have an opinion on is if this doesn’t start falling soon, I think there’s gonna be people that are trying to make money on the short side of this thing because they didn’t make money on the long side, that they’re gonna start feeling some pain. And as our curve has come up a bit over the past month, we’ve got this really interesting market conditions where, again, if we’re up at these levels even a month from now, two months from now sure, I’d make the argument, why couldn’t you have another squeeze higher? Because there’s still not that much product available right now today. We’re starting to see that change. We saw some really nice volume on the CME spot auction just this morning. But that’s what the eyes are on is how long does this thing take? And if it starts this week versus six weeks from now, I think those have very different implications for how the market reacts. Josh White: We’ve got three different reactions to the nonfat market right now. You’ve got the true nonfat participants that need product now, and that’s priced in the $2.25-plus type range right now on the countryside. And to your point, we’re seeing a few more loads available which is a decent sign. The market participants seem pretty convinced that we’re gonna see an easing from this price, but so are futures. And I think that’s another important thing to point out is that the futures curve is inverted and it’s quite a bit lower than the spot price today. So, you can have both situations. You can have a spot price drop while the futures price maybe doesn’t as much. Over the past few days, the futures curve has definitely traded lower, confirming what we heard there is that most people don’t believe in this market being as tight as it is currently into the future. And we have to remember, this is traditionally a globally traded product and our competitors across the pond are still quite a bit lower and making a whole lot of skim milk powder today. So, I think longer term, if the assumption is that we need to compete globally for at least some business, particularly in markets like Asia, we’re gonna have to be a little bit more aggressive to compete, but futures are saying we will be. Another important topic was now we’re starting to see an acceleration of the NDPSR price now that we’ve had several months of higher spot prices, and that’s starting to have an impact on markets other than just the powder market. And I think maybe, Gus, you would have a little bit more to say about how the market’s reacting to some of the component prices moving higher in the solids nonfat side of things. Gus Jacoby: The situation as we’ve talked about in the past is protein is being pulled in a lot of different directions and we don’t see that demand going away anytime soon. The one comment I would make though is your isolated protein, certainly UF milk in fluid form, are seeing some of the highest demand that we’ve seen in a very long time. So, if you’re cheese maker, if you wanna fortify, and certainly on higher butterfat milk, there’s plenty of folks that wanna fortify right now, there’s probably a little bit of a pull on all the skim solids at this moment in time. I don’t think that story has changed. We’ve beaten that up for a while. But that’s certainly gonna pull a fair amount of milk out of the dryer for nonfat. You look at where the capacity has been added, whether it be in the Southwest with all the large cheese plants that have been added there, and then Upstate New York where some dryers are also gonna sit idle as some new processing capacity comes on there. That’s two areas of the country that are gonna get a lot less milk into the nonfat dryers than previous. And certainly here we are now in the flush as these plants ramp up, it would typically be your highest powder production timeframe, and instead those solids are going elsewhere, and that will keep nonfat production down for the foreseeable future. Ted Jacoby III: Gus, are you seeing milk move towards Class IV plants instead of Class III plants this year? Gus Jacoby: We still see fortification solids during this flush finding its way into cheese plants. But that’s your surplus skim solids that might exist, and those are only available, I believe, because of the flush. Now, it’s not UF milk, right? UF milk tends to be going elsewhere whether it be going to some sort of IV or II-type arrangement, whether it be a high-protein beverage or a high-protein dry product. But you are still seeing a fair amount of condensed and other skim solids going to the cheese vat for fortification purposes. I think the way that will unfold likely is that those surplus skim solids that aren’t being turned into isolated protein products, they’re gonna probably get pulled out to a certain degree of the cheese plants, and then cheese plants will just not be able to utilize fortification as they are typically used to or would like as we move through the year. Ted Jacoby III: So, what you’re saying is if the price stays up here, the milk that is going into the dryers making nonfat will continue to do so longer than usual, and they won’t lose the flush-specific skim solids? Gus Jacoby: I don’t know if I’d agree with that, Ted. I think the flush, no matter where you’re at in the country, the surplus solids find its way to the dryer typically. And as we come out of the flush, certainly less solids everywhere will go toward the nonfat dryer, just as it always does during those seasonality changes and we come out of the spring. It’s just that the areas I talked about, Southwest and Northeast, they’re not getting near as much as they used to in the flush, and so overall that production is going to be missed upon the market. Ted Jacoby III: Do you sense any kind of competition right now between Class III and Class IV for the surplus milk, or is it just following its usual path? Gus Jacoby: There’s some surplus condensed solids going to cheese plants that if a better price could be had into a powder plant, it would go there. Ted Jacoby III: Okay. Gus Jacoby: And that’s happening predominantly in the upper Midwest, and maybe a little bit in other areas. But certainly if you’re gonna get a higher return going into cheese than you could going into powder, you’re gonna go after it right now. And that’s where the demand I would say is. But surplus is surplus, and you’re gonna sell it to the highest return you can. Ted Jacoby III: Okay. That sounds good. Joe, anything to add on the nonfat side? Joe Maixner: Any milk that is making it to dryers, they’re prioritizing the milk to try to get into the milk protein concentrate (MPC) sector or milk protein isolate (MPI) as opposed to nonfat because the return is better. Ted Jacoby III: Makes sense to me. Joe, Josh, are we seeing MPC prices rise faster than nonfat right now? Josh White: Yeah, no, it has to be faster than nonfat because basis is appreciating. You’ve got an MPC market that likes to trade on a multiple of nonfat, and that has appreciated. That has continued to increase. Now, again, I noted earlier we got an inverted forward curve, which means that basis can be going up and price could stay the same or even go down the second part of the year. So, that’s the dichotomy we’re dealing with right now, is that from a cost basis, it looks like it could be pretty okay the rest of the year. And if there’s dry time available, you would think you’re gonna maximize that MPC. And when compared to whey protein concentrate (WPC) prices, MPC 85 is a bargain. But again, not everyone can easily substitute between the two, and that takes some time for the market to figure out which market participants may be able to switch between WPCs and MPCs, may take a little time for them to make that switch. Ted Jacoby III: So, I just wanna clarify for the audience. There’s two different ways we can look at it. If we’re selling it forward into the second half of the year, from a market perspective, we may be selling it for a lower price because the futures curve is a lot lower than the cash price is today. But if we’re selling MPC or nonfat today, you’re telling me that the nonfat price has effectively doubled in the last three months, and the MPC price has more than doubled because not only has its basis doubled based on the nonfat market, but the overage above that has also gone up. Josh, you’re on mute. Josh White: I thought you said clarify for the audience, so I didn’t realize it was a question for me. Ted Jacoby III: Oh the answer is yes. That’s exactly what’s happening. Josh White: Yes. Nailed it. Ted Jacoby III: All right. So, basically what we’re saying is skim solids and protein are in high demand. That’s loud and clear. [Center commercial] Ted Jacoby III: Mike, what about from a federal order perspective, how this all feeds through the federal order? Obviously, since it’s a higher market right now, Class IV is what’s driving Class I prices. Obviously, it drives Class II prices. Is there anything else that kind of shifts around in a market like this? Mike Brown: There’s a couple things. First of all, a lot of your Class IV production is co-op owned. And what we’re seeing is depooling in Class IV, and to some degree Class II where it’s possible. So, rather than to go into the pool and get a blend price that’s below your class price, they’re electing to depool, just like we saw with cheese last fall when it was much higher than butter powder. We’re seeing some of that. But if you’re pooled, you’re ambivalent because you’re gonna pull the pool draw out anyway, and it’s not gonna make a lot of difference. It’s markets like the Southwest where a lot of that milk is never pooled or rarely pooled, and even in the eastern part of Kansas, changes in central order, you less have to pool it because the differential is so much wider now from Kansas City than it used to be. You may see more activity as you watch pool decisions being made since last June when the changes, people are getting a lot better at predicting whether or not they should be involved with the pool or not because it’s getting easier to predict because behavior is more what you’d expect. So, from my point of view, it has some effect, certainly, and if you’re trying to maximize a return to your owners and you have a plant with capacity and you get a higher value product, you’re gonna try to run the milk through that plant. Second part of that, of course, if you already have obligations, and some of these new cheese plants have supply obligations, they’re gonna get their milk regardless of the shift in price. So, it has less effect than you might think, but there is still effect, particularly if you’re having to pool your IV. There’s certainly a lot of IV being depooled right now. Production isn’t much lower. It’s just regionally shifted some, a lot more in the West Coast right now than in the Southwest. The orders kinda mute what would be the normal market decision to maximize return on milk for a producer because if you’re gonna blend it anyway, you don’t have the incentive that you do if you don’t. That said, right now, Class III guys, they’re pooled. The other part of this III-IV spread is, of course, what is the value of those solids into those cheese plants? I’m working on that today, Ted, trying to figure out how much does the high-WPC80 and WPI market bring to the value of buying outside Class IV solids to justify the price? Just on the price of cheese, I got some numbers here in front of me, you’re looking at on a per-pound cheese yield basis, if you buy powder in the powder market right now, it’s 25 to 40 cents more per pound cheese yield than it would be if you’re getting it from Class III. Mike Brown: You better either have a great margin or you’re really hitting up the whey market, and I’m gonna figure out exactly what that is. But that decision isn’t just a cheese decision, particularly with whey protein so high. There is a value of that nonfat dry milk whey protein that in the past didn’t matter as much as it does now. So, it may make that slightly more attractive or less unattractive than it would’ve in the past because your whey returns are so high on that protein compared to what they have been historically. So, it’s complicated, but it’s not just the value in cheese. It’s the value in cheese and in whatever your plant can make for whey. If you can make WPC80, you can pay more for those nonfat solids, obviously, than you can if you don’t. Ted Jacoby III: So to clarify, usually when you ship fluid into a Class III plant, you pay the Class III solids price. Mike Brown: That’s correct. Ted Jacoby III: If you use powder, you’re gonna have to pay whatever the prevailing nonfat price is. And most everybody running a cheese plant right now would really like their skim solids in fluid form so they can pay those Class III values instead of the Class IV values. Mike Brown: Oh, absolutely. But if they’ve got excess fat, and a lot of our American-style cheese plants now do have excess fat, what’s your market for that fat, and does it make sense to pay a little more for that protein from the Class IV side so that I can get a better price for that fat? Although we all know multiples this year aren’t near as horrible as they were a year ago. Yeah. So it’s a little better market. If you’re gonna get right down to dollars and cents, really you gotta look at your whole product mix out of your cheese plant and figure out what can you really afford to pay for those solids . And plus the opportunity of running your plant more full. What’s your fixed cost savings by running more product through your plant even if the cost is a little higher? Ted Jacoby III: Speaking of butterfat, Joe, this butter market just feels like it’s gone a lot lower than we expected it to go. Joe Maixner: Yeah, it’s weak. Cream’s not sloppy. It sure doesn’t seem like it’s super long in the market. But there’s still plenty of butter being made, and I think that this market’s also pricing in the fact that we’re anticipating that export reports are gonna decrease in the amount of butter that will get out monthly moving forward until this Middle East conflict gets resolved. And we’re basically peak flush through east of the Rockies, so this is the highest production point we’re gonna see through the rest of the year until we get past the holidays. Ted Jacoby III: Gus, are cream multiples poor right now as well? Gus Jacoby: We’re still on the flush, right? But they’re much, much tighter and higher than they were a year ago this time. It just goes to show that the additional churn capacity we’ve seen around the country and some better preparation by a lot of folks in dealing with excess butterfat has made this market a fair amount healthier when it comes to cream. Not near as sloppy as it was a year ago. Multiples have held at or better than even the year previous for flush times. So, I would imagine that what we’re gonna see here going forward is representative of this new marketplace. Ted Jacoby III: Josh, anything to say about the whey protein market? Josh White: Maybe some early signs of a market trying to figure out if it wants to continue on the trajectory it’s been on. WPC80, the general consensus out of ADPI is it remains tight. Seen a few extra spot loads trade this week though, so maybe some people were waiting for that information to let go of a little excess inventory or some incremental loads. WPI feels like it’s pretty stable. And the market came to the conclusion, I believe, during the ADPI conference, that, okay, it seems to be priced right. It doesn’t feel like WPI needs to go up at the moment. And we’ve definitely seen more offers since the show. Not ready to conclude that’s going lower because of where the WPC80 price is and how tight the WPC80 market is. So, those two have really converged at the moment, almost to a point that doesn’t make a lot of sense, the price spread between the two, so the market’s going to figure that out. So, yeah, that would be the only changes. Other than that, maybe just reiterating that we are constantly talking to new customers about new demand creation, and also outside of the traditional sports nutrition category, a lot of new CPG product launches and things like that are absolutely still in motion and consuming a lot of dry protein. Ted Jacoby III: Makes sense to me, and I would agree. And then, what I would say about cheese is it was easily the most boring market at the ADPI. I’d start by saying that. It feels like a market where a lot of people are complaining that the price isn’t low enough for them to get new sales on, but they also can’t find a ton of product out there. There is some spot product trading around, but there’s not massive quantities of it like you sometimes see in the height of the flush, which just makes me feel that right now the cheese market is in balance. In balance in a way that maybe we’re not getting a huge amount of additional export sales on the books, but we are continuing to export at a pretty high rate , especially considering there’s a lot of sales on the books that were put on the books earlier in the year that are gonna continue to ship. And it’s kept this market, this cheese market, I think, relatively well cleaned up considering we’re in the height of the flush. So, we don’t see a lot of movement going forward, at least in the next few months in cheese. You’re gonna trade in a 30 cent range, 20 cent range around where the current price is. That would be my take on the cheese market. All right. To all our listeners, I really appreciate you guys listening to us. I hope this information is helpful, and we look forward to talking to you soon. Take care. [Ending credits]
• 
  Steady Markets, Shaky Ground 15.04.2026 19min

  With Easter behind us, demand is easing, milk production is climbing, and the spring flush is here. But beneath the surface, the dairy complex is anything but comfortable. In the latest episode of The Milk Check, host Ted Jacoby III and the Jacoby team look at the fault lines hiding beneath today’s seemingly stable dairy market. In this episode, we cover: Why milk is getting longer, but not everywhere How added processing capacity is changing the spring flush Whether butter has found its floor, or is simply stuck Why energy may be the biggest wildcard in dairy right now From regional milk balances to butter’s next move and the growing influence of energy costs, we look at what is really driving the dairy complex right now. To hear what could hold, what could crack and what the next few months may mean for dairy, listen to The Milk Check episode 97: Steady Markets, Shaky Ground. Got questions? We’d love to hear them. Submit below, and we might answer it on the show. Ask The Milk Check Ted Jacoby III: Coming up on the Milk Check. Joe Maixner: It’s really watching the energy markets because it’s going to affect literally everything. Ted Jacoby III: Welcome to the Milk Check from T.C. Jacoby and Company, your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I’m Ted Jacoby. Let’s dive in. Today is April 6th, 2026. It’s the day after Easter. it’s also the birthday of a few illustrious people like Paul Rudd, Lando Calrissian, or actually Billy D. Williams and our own Joe Maixner, and we’re here to talk about dairy markets today. Sorry, Joe, and we’re here to talk about dairy markets today, and what we’re gonna be talking about is it’s the day after Easter and demand for the next oh five months or so tends to slow down a bit, while milk production tends to pick up and it’s peaking probably right as we speak, and over the course of the next four to five weeks. So, what does that mean for the dairy landscape? What does that mean for the price landscape? When I started thinking about what we were gonna talk about for this podcast, the market seemed to be in a lull right now. And then I realized it’s that time of the year. The question is, are they gonna stay here? Are they gonna go lower? We know that milk production is gonna continue to increase, especially in the Midwest, and we know that the next demand event of any significance is at least five to six months away. But where we’ll start is we’ll start with milk production. This is the time of year when things tend to get a little bit long. Gus, is milk long right now? Gus Jacoby: Depends what region of the U.S. you wanna talk about. From what I understand, there’s some areas of the West that are very long. The upper Midwest, when you have plants go down, it gets a bit ugly. But looking into the mid East, the Northeast, the Southeast, certainly the Southwest, where there’s quite a bit of new processing capacity, all these areas, are not all that long. It’s certainly the spring flush, but when you look at the Milk Production Report, you would think they would be a lot longer. And I think additional processing capacity in all these regions that we just discussed are where we’re a little bit shorter than we anticipated, considering what time of year it is. Ted Jacoby III: Usually, this time of year we’re hearing of milk moving at 2, 3, 4, $5 under. Is that happening this April? Gus Jacoby: There’s some spots in the upper Midwest where it gets that discounted, yes. But I would say that has more to do with plants being down in addition to the surplus that causes it to get that long. I think if everything is functioning in the region — in the upper Midwest, Mideast or anywhere on the Eastern corridor — you’re not seeing quite the growth that’s shown in the Milk Production Report. Anytime you see north of 2.5% or 3% in a Milk Production Report, usually that means the flush is a really ugly period of time. But in these regions of the country, we’ve added enough processing capacity to balance things out a bit more and not make it quite as long as you would think. Ted Jacoby III: So we didn’t really add any plants west of the Rocky Mountains. And in that case, the flush, especially in California, is probably already in the rear view mirror. Are we seeing milk really long in California and along the west coast right now? Gus Jacoby: I’ve heard that California, for a while there did get pretty long. That area hasn’t had the additional processing capacity outside of the Pasco facility to deal with the level of surplus we have in those regions. Ted Jacoby III: That means it’s fair to say that we’re in the flush right now, maybe past the flush out West Milk has gotten long, milk is plentiful, but we’ve added enough milk processing capacity that generally speaking, as long as there in, there are not any plant breakdowns. We seem to be able to handle the additional milk supply and we’re getting it all processed. Gus Jacoby: Yes, that’s the truth. Joe Maixner: The West has been running full for the past couple of months. But cream has not been super long. It’s been getting into the churns, but it’s also been finding homes elsewhere and it’s had decent demand. It’s been a little surprising that we haven’t had as excess of cream as we would’ve anticipated given how long milk has been. Ted Jacoby III: What about on the powder side? I’ve heard that the plants are not necessarily dumping any milk, but the plants are full enough that they can’t run anything specialty. So, all they’re running is straight up nonfat dry milk, which these days with protein component values in the milk the way they are, 38% protein, but they’re just running ’em flat out to get all that milk processed and dried. Is that a fair way to put it? Josh White: Yeah, I would say so. Ted Jacoby III: Okay. Milk’s getting processed. We’re making a lot of it, but Easter’s now in the rear view mirror. Since our runup, late January, early February, the cheese market seems to have settled into a price somewhere in the $1.60s, the butter market’s been $1.70s, $1.80s, it popped up over $2 and it seems to have faded since. Is it in its sweet spot yet, or where do you think the butter market will go over the next three to four months? Joe Maixner: I think there’s a lot of factors that go into where the butter market’s gonna price over the next few months. Obviously, we’ve got the macro events going on, the conflict in the Middle East, that’s pulled a lot of export opportunity out, as we’ve talked about at length in the past few podcasts. But there’s been a lot of product trading in this 15¢ to 20¢ range that we’ve been in over the past couple of weeks, and it seems that we’ve found a good range where buyers and sellers are happy to move product. There’s probably not much more downside potential at this price. But it’s a very real possibility that we could just stagnate here for the next few months until we see any type of real demand shift and production dies off into the summer. Ted Jacoby III: Are we gonna continue to be exporting butter? Joe Maixner: Yeah, absolutely. We’re still seeing exports move. Obviously we’ve lost some of our largest growth markets with this conflict, at least temporarily. But we’re still exporting to other regions, and all of those markets are growing. Will it be enough to offset the losses? I’m not sure, but we’re still moving product out of the country. Ted Jacoby III: The cheese export numbers have been phenomenal for about the last six months. We’ve been up over 30% year over year, almost to the extent of being a little bit surprising. Are we gonna be able to keep that up, do you think? Or is this market going to peter out a little bit ? Jacob Menge: You gotta suspect that you stop getting the blockbuster export numbers before too long because it has been two months now since we’ve come off of kind of those rock bottom prices that we were at. I think that will certainly take the top off of those export numbers. Cheese in general has probably been one of the quieter of the dairy markets, probably the quietest. It’s been sneaky though. There’s been these moments where it’s been hard to find product. There’s been moments where you can find product and I think it definitely is a tale of exactly what cheese you’re looking for. I don’t think colored cheddar has been particularly hard to come by. Meanwhile, white, for export has been pretty tough. All of that has resulted in this really nice gentle climb higher on cheese prices. We’re starting to see some cracks in the floor, especially internationally. We’re hearing mozz prices starting to get some pushback outta Europe. Those blockbuster export numbers on the cheese side are probably nearing an end. And if not then I think that’s gonna be the only thing that can keep driving the cheese price appreciably higher from where it’s at. If we can keep getting these pretty impressive numbers, sure, I don’t see why we couldn’t keeps stair stepping higher. Ted Jacoby III: Where the export numbers go, the price of cheese goes. Is that a fair way to put it? Jacob Menge: It certainly seems like an export driven market right now. Our opinion kinda long term is that’s U.S. cheese. This last year or so, maybe more 18 months, reflecting back on it, been the coming of age era for a serious export driven cheese price in the U.S. Historically, obviously export have played a factor, but it seems like that’s going to be the dominant force today and in the future. Ted Jacoby III: Yeah, I think I’d have to agree with that. And then there’s nonfat. Josh, this nonfat market, it sure went a lot higher than anybody expected. Even when it started to rally, we thought it could go up into the $1.50s, $1.60s, but I don’t think we expected the $1.90s. Is this market gonna stay here? Where does this market feel like it’s at today? And how does play out from here? Josh White: It’s still a tight market, Ted. Seems like there’s some commitments that are still behind. On the manufacturing level, it seems like demand’s been very strong. Let’s be clear, the West Coast is running a lot of nonfat right now, and it’s not changing the climate. Where we’re really seeing the vacancy in production is in the middle part of the country. It’s pretty well reported now. Everyone’s clueing in on this idea that there’s just been a lot of growth in the protein beverage market and in the UF space, and that seems to have kept a lid on our production growth for nonfat dry milk relative to the milk production growth and the protein growth that we’re experiencing in the milk. So yeah, it still remains pretty strong. There’s still good demand. Yeah, there’s a lot more conversations and we’re having a lot of conversations with customers across all the different industries that consume dairy products about what these higher prices mean. Are they real? Are they here to stay? If you look at the futures curve though, we’re way higher than that current futures price, and it’s an inverted curve, so we’re gonna have to pay a lot of attention to how that plays out, particularly as we get into these heavier milk production months, domestically and in Europe. But to be clear, there’s a lot of milk; that milk’s being processed into a lot of products; but in the U.S. side, we’re not seeing huge nonfat increases. I think across the pond though, they’re making a lot more skim milk powder, and they’re the beneficiaries of this tight market right now. Clearing a lot of that product into the international clients that, historically may have been looking to the U.S. as well. Ted Jacoby III: Do you think that means we’re gonna be export handicapped for the next three to four months that might just weaken the demand side of the equation for U.S. nonfat? Josh White: Yeah. The trade’s not as free as we all hope and expect it to be, and what I mean by that is there’s barriers to entry for bringing, like European product into Mexico. Approved brands across the world that might make it more difficult to exchange one supplier for another. But I think the answer to your question, the longer we maintain this type of premium, the less likely we are to export into some contestable markets. And it’s really tough when you’re talking about managing supply chain over the course of a year to get that right. There’s a real possibility that, we could miss some business that we wished we had later in the year. But, as it stands right now, it’s not like we’re sitting on a lot of extra product to move. Ted Jacoby III: So, when we look to the next, 1, 2, 3 months, things are tight enough. The nonfat market’s still coming from a place of overcommitment and then still trying to work through that. And there’s No reason to think that we’re gonna be trading nonfat in the $1.20s by Memorial Day. Josh White: No reason to think that. I think that we’re putting ourselves in a position where now’s the moment where we can take a little bit of the pressure off the market. We’re starting to see a little bit more seasonal milk in the middle part of the country. Nothing compared to what we saw a year ago going through the dryers, but we are starting to see maybe some signs of some relief. Ted Jacoby III: Proteins is the other market that seems to be shooting for the moon, up there with Artemis II. Are those protein prices gonna stay there or are they gonna come down? Josh White: Pointed question. Not for the second quarter, it sure doesn’t feel like they’re coming down. Every spot load that I see offered trades almost in the air. There still seems to be really good demand despite higher prices. And also despite a lot of customers asking about substitution. The answer to that question is maybe different for the next quarter than it might be for the next year. We’ll have to see. But as it stands right now as it relates to whey proteins, no slowdown in demand. Price strength remains, loads are very expensive. Conversations are less about the willingness to buy product than they are about the credit worthiness to sell that product to the clients because of just how expensive a load of WPC 80 or WPI cost today. We’re also starting to see some momentum in the MPC markets. Shouldn’t be a surprise. MPC 85 prices have been increasing. We’re starting to see customers that have the flexibility to do some substitution between WPCs and MPCs, considering it. More conversations about alternatives within the dairy complex like caseins and caseinate. But then, I have to imagine there’s also conversations happening about substitution outside of the dairy complex for plant proteins and alternative proteins. It’s a challenging market. Certainly a good sign that the consumer, particularly in the U.S. is paying a lot of attention not to just wanting more protein in their diet, but also the quality of the protein that they’re consuming. And it’ll be really interesting over the next year to see that tug of war: the valorization of high-quality, highly digestible dairy proteins, versus cheaper proteins going into certain applications and how the consumer responds to those economies. Ted Jacoby III: What’s the one product in the dairy complex right now that you’re really worried about? Because right now we just went through all the major commodities and there seems to be at least stability in the short term. Which one do you think breaks first in terms of price? What market should we be paying attention to if this dairy complex is gonna start to weaken on us? Jacob Menge: I’m paying most attention to butter right now, because I think the butter price has made these kind of violent moves. Not nonfat, violent, but more like consistently trending lower all last year. And then it’s made a pretty good recovery with that new crop, old crop switch. And then it’s trended lower from there. I think that’s important because that’s gonna have a big impact on that Class III, Class IV spread. And I think that Class III, Class IV spread is gonna ultimately drive some decisions at the fluid level, which is gonna have knock on effects for export markets, not just for butter, right? This is for all of these products. Because of that butter price , I think the math can be swayed one way or the other depending on where that goes. We have these kind of baked in assumptions on, okay, nonfat’s probably not staying at $2 through 2026, okay. We have some baked in assumptions on cheese. I think that means that decision maker is butter. And would anybody be shocked if it went up 50¢? Probably not. Would anybody be shocked if it went down another 10¢ or so? Probably not. I think you certainly would have debates around this, but that changes that Class III, Class IV spread enough that I think that has a lot of knock on effects. Ted Jacoby III: That makes a lot of sense. Josh, what about you? Which market are you paying attention to the most? Josh White: I would just say just the market. I think nonfat’s the obvious answer to that, but our entire dairy markets have been really changed this year by this protein movement. And what I can’t get my head around is the GLP-1 and cheaper GLP-1 catalyst. At what moment does a hundred dollars to fill a gas tank on a sedan start to change what people are willing to spend? That’s the one that I can’t really get my head around because it would be very easy to say, “Look out: these high protein products are here to stay.” The science backs it; people are eating less calories, but better calories. And that absolutely works for dairy proteins. But then on the other side, when you’re forced to make a decision about how you spend your money are you gonna get to a point where it’s choosing whether or not to fill your gas tank or whether or not to buy the powdered isolate. I wonder if we find that threshold at some moment this year. Ted Jacoby III: Yeah, I think that’s a great answer. Which market do you think is affecting the dairy markets the most right now? It’s the gas market. I think that’s fair. Joe, how about you? Joe Maixner: I’m clearly watching butter for obvious reasons. But I echo what Josh is saying. It’s really watching the energy markets because it’s going to affect literally everything over the course of this year. Jake brought up a great point about the Class III, Class IV spread, though. With the strength in nonfat, I hadn’t given a whole lot of thought process to butter’s impact in Class IV because you’re seeing Class IV through the rest of the year and into 27 at a minimum in the mid eighteens level which is a dollar premium to Class III, even with an inverted nonfat market. That’s definitely one to keep an eye on as well. But again, as a whole, just energy, energy’s going to affect everything all the way down to the consumer level. Ted Jacoby III: Yeah, I guess I agree. Gus, what are your thoughts on this market? Gus Jacoby: It’s hard not to talk about energy right now. That’s pretty obvious. Certainly when you’re hauling milk it has a big impact. Those fuel surcharges, hiking up to the degree that they have has made hauling milk quite a bit more expensive, considering the amount of water that’s being hauled and how much more expensive it is.  That is something we can’t control. None of these markets are anything we can control. But when it comes to the dairy markets, I think the skim solids is something that has been very interesting to me. Gus Jacoby: How tight that market gets, the limitation that cheese has in getting fortification solids, are we gonna start turning to powder to fortify, and can cheese plants afford it with the Class III, Class IV spread as we shift, obviously with this protein demand continuing to increase and all the other areas that skin solids are required. I think it’s going to have a ripple effect on our industry that’s gonna take a while for us to get used to as skim continues to, find more and more demand. So, for me, it’s an interesting marketplace and I’ve been paying a lot of attention to that lately. Ted Jacoby III: Sounds good. Awesome. Thanks guys very much. I thought that was a nice summary of what’s going on in our markets right now. We’ll see how the next few months play out. Appreciate the time. Thanks for joining us today, and everybody stay safe out there.
• 
  A Logistics Expert on the Iran Conflict and Dairy Trade 02.04.2026 19min

  Weeks into the Iran conflict, the disruption to dairy logistics is becoming more visible. Shipping dairy to the Middle East used to take 30 to 40 days. Now it can take 60 to 75. And the longer this conflict lasts, the more pressure it puts on the dairy trade. In this episode of The Milk Check, host Ted Jacoby III talks with our logistics expert, Tyler Jokerst, Director of Trade Operations, about what all this means for dairy producers, traders and exporters. In this episode, we cover: Why Persian Gulf access remains severely limited, and how exporters are responding How normal 30- to 40-day transit times can stretch to 60 to 75 days Why alternate routes are creating new choke points How higher oil prices are raising shipping and trucking costs Why fertilizer, feed costs and food inflation are becoming part of the conversation How delayed demand, product displacement and global economic stress could bring more dairy market volatility Listen to The Milk Check episode 096: A Logistics Expert on the Iran Conflict and Dairy Trade. Got questions? We’d love to hear them. Submit below, and we might answer it on the show. Ask The Milk Check Ted Jacoby III: Coming up on The Milk Check. Tyler Jokerst: As this thing progresses, it could prolong it. Ted Jacoby III: 30 to 40 days of shipping from the East Coast to the Middle East is now 60 to 75. Welcome to The Milk Check from T.C. Jacoby and Company, your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I’m Ted Jacoby. Let’s dive in. Ted Jacoby III: Today, we have a special guest, Tyler Jokerst, our Director of Trade Operations, and we’re asking Tyler to join us ’cause we thought it would be a pretty timely topic to discuss logistics, both international and domestic. With everything going on in the Middle East, how is that affecting logistics, in terms of global trade for dairy, especially important for U.S. dairy, considering the fact that we’re exporting over 20% of our milk production these days? But it’s also affecting us domestically. Gas prices are probably up over 30% at this point, which is going to affect costs when we’re getting all the dairy products we make to consumers here at home. So, Tyler, welcome and thanks for joining us. Tyler Jokerst: Thanks for having me, Ted. Ted Jacoby III: Tyler, what is going on in the Middle East? How is it affecting logistics? Are we going to be able to get container ships into the Persian Gulf anytime soon? And if not, what are we doing in response to that? Tyler Jokerst: I think the easy answer is: we don’t know, other than there is a war over there. That’s the biggest thing right now causing the impact, and the huge leverage point Iran has is the Strait of Hormuz. For that strait, there’s a lot of product that goes in and out of there. Primarily oil, but, yeah, a big part of that is containerized shipments, as well. As we all know, the Middle East is a big purchaser of dairy products as well, right now. And we’re seeing a lot of disruption there as far as what we can get in or out of there. It’s almost come to a virtual stop. Ted Jacoby III: So, they can’t get into the Persian Gulf. Are there other options? Tyler Jokerst: Tomorrow, there might not be. That’s the situation we’re in right now. Every day is a day-to-day situation. The current workarounds are what the steamship lines are calling landbridges. So, essentially, you’re porting into ports on the other side of Saudi Arabia, where you’re not going into the Persian Gulf, and they’re either working on truck or train routes. It can get across, over to Riyadh or Dammam. Ted Jacoby III: So, Dammam is the main container port for Saudi Arabia and the Persian Gulf. What’s the port in the Red Sea that we’re using now instead? Tyler Jokerst: King Abdullah is one of ’em. If you go further north, where you’re getting into Jordan, you have Jeddah as well. So, there are a couple of different options there. I think the biggest issue that poses is you’re putting a lot of stress on infrastructure that maybe wasn’t built to handle that much volume coming through. This is another ripple effect we’re keeping an eye on, and we’re staying close with our freight forwarders and our steamship lines to see if we’re gonna have any ripple effects as far as boats that are anchoring offshore and waiting to get checked. If you were to look at it right now, you’re looking at a miniature effect of what COVID was like in LA back in 2020, when you had numerous boats anchoring offshore, waiting to get offloaded, because you’re at a choke point, trying to put all that supply into one port. So, it’s unfolding as we go through this day by day. Ted Jacoby III: So, I take it, there’s a traffic jam going into Jeddah and King Abdullah at [00:03:00] the moment? Tyler Jokerst: Just a little bit. Ted Jacoby III: What delays are we experiencing? Tyler Jokerst: If you were to look at the product on the water, we are currently looking at maybe 15 to 20 days in our current state. As this thing progresses, it’s gonna be up to the providers, the steamship lines and the freight forwarders and how they work with us to be able to dictate what new routes they need to take or what alternatives they need to make, as far as getting this product to those consumers. So, it could prolong it to where it’s a constant 20-day longer shipping period than what we’re used to seeing in those areas, which is typically anywhere from 30 to 40 days. Ted Jacoby III: 30 to 40 days of shipping from the East Coast to the Middle East is now 60 to 75. Tyler Jokerst: Yep. Absolutely. You’re right on that one. Ted Jacoby III: Are we still loading containers of cheese and powder and butter and other things and putting ’em on boats and sending ’em to the Middle East? Tyler Jokerst: Yeah. We are. One of the key things that we’re having to keep an eye on is per steamship line. So, if you’re working with freight forwarders, they work with numerous different steamship lines, and every steamship line handles it differently. And the main part of why they’re handling it differently is all related to the geopolitics. Some of the steamship lines are owned by Mediterranean companies, maybe in Italy. There are other steamship lines owned by companies in Israel. They’re probably not getting through the Strait. And then you have the Chinese and Korean-owned steamship lines that tend to have a little more leeway because they might be a little more neutral with Iran, where they might be allowed to pass.  It’s different with every carrier. So, whenever we look at this, and we assess the notes that we have to have with our freight forwarders, we have: who’s the service provider that we think we should be using, because that’s the one that tends to have the golden ticket in. Tyler Jokerst: And that’s where we have to balance out cost and service. They might have the golden ticket that can get them into the port. That’s gonna come at a price. They know the demand’s higher because, from a geopolitical standpoint, they can get in and they can get the job done where maybe the other providers can’t. You start peeling a lot more layers back than what you’ve historically had to, where you just look at a rate in a transit and say, “Okay, this works. We’ll communicate according to our customer and meet their demands.” Now, you’re dealing with a war. It’s unpredictable for those involved directly and indirectly, including us. And that’s where we have to weigh out additional options that are being thrown at us on a daily basis. That target is moving. We’ll come in tomorrow, and we’ll probably have a different set of rules that we need to follow for that day. Ted Jacoby III: But you bring up a good point. I never thought of it that way before. It’s like you can’t take Delta Air Lines into the Middle East because it’s American-owned, but you could probably take Emirates. Most big steamships are actually not owned by the U.S., and those steamship lines that have good relationships over there actually can still get product in. Tyler Jokerst:  I don’t think you get any airplanes into the Middle East right now, but yeah, from a steamship line standpoint, you can. Whenever I say they can pass through Hormuz, you went from several hundred ships going through the Strait of Hormuz in a day to now, single digits. So, that’s a loose thing where it’s allowed, but less risk of impact or targeting from an economic standpoint, whenever you’re going on [00:06:00] one ship versus the other, that’s the biggest thing to consider. Ted Jacoby III: How much have shipping costs increased? What was the going rate for a container into the Middle East from the East Coast, and what is it now? Tyler Jokerst: If you’re looking at door-to-door, or door-to- port, we were hovering around $ 8,000, all in, and now it’s looking more around $10,000, all in. Ted Jacoby III: Maybe 20%, 30% increase in shipping costs. But that’s not double or triple. Tyler Jokerst: Not yet. It could be by next week, though. Ted Jacoby III: Got it. Tyler Jokerst: Yep. Mike Brown: Tyler, when you have a select group of shipping companies you can work with, and you look at the 20%, 30%, that surprised me, it’s not higher. Do we see people deciding we’re just gonna lay low and not try to ship to that market for a while until we see things more stable because of the risk? Tyler Jokerst: I won’t name specific providers, but we do have some providers where when this thing started to kick off, they were already putting some plans together, and then by the following week, they decided that any of their refrigerated equipment they didn’t want going on that landbridge option that we were talking about earlier. So, you are seeing that as well, where they’re purely looking at it from an insurance standpoint. Insurance costs are going up a thousand x and saying, “Okay, the risk isn’t worth the reward right now,” because of how much insurance costs to go in there—Wartime, surcharges, things like that. And they’re completely staying out of the situation altogether and just rerouting their equipment. The bigger effect is that as this goes on, and there’s no improvement to the current situation, it will ripple into the rest of the markets, and you will start to see delays at other ports that maybe service these ports, as far as these types of trade lanes. And you’ll start to see some disruptions in the supply chain because people have to do something with that product that maybe they already sold. Reselling it might not be an option because the way the markets are right now, the pricing might not allow for that to happen, especially with dairy. If you’re getting a premium for exporting it versus selling it domestically, you’re gonna sit on it and wait this thing out. So, now you start to have backups in your supply chains at the origin ports, maybe the domestic warehousing, or even, in some cases, the manufacturing sites. So, there are a lot of effects that come from that. Ted Jacoby III: Tyler, I know that Europe has traditionally sold a lot more dairy into the Middle East than the U.S., even though the U.S. does do a decent amount of business there. They’re having the same problem we are in terms of getting to these ports, but are they capable of shipping product over the land? Let’s say across Istanbul, through Turkey and get there that way? Or are there too many issues with that approach? You’re going through Jordan, you’re going through Syria, you’re going through the Kurds. Territory. Tyler Jokerst: Israel’s dropping bombs north of the country as well. You’re not just looking at us dropping bombs in Iran and then Iran, throwing missiles across the water. You got Israel trying to take on a two-front war as well. I couldn’t see how a land option would be feasible. Ted Jacoby III: Yeah, I would have to agree with that. So, we know what’s going on in the Middle East. We know that it’s harder to get the product there right now. How’s it affecting us back home? Where are we seeing the effects [00:09:00] in logistics back home? Tyler Jokerst: Gas prices all day. I think barrels are currently sitting at around $95 a barrel. We’ve seen truck prices rise anywhere from 10 to 20%. It is a prolonged tightness in capacity, as well, but fuel has been a big factor as far as our domestic truckload goes, and the rates that we’re used to paying at this time of year. Ted Jacoby III: Outside of just increased cost because of increased diesel prices, are we seeing any other effects? What about the domestic ports? Are we seeing any backup at the domestic ports? Or are our ports still functioning normally, and it’s really only a fuel surcharge problem? Tyler Jokerst: Yeah. Our ports are operating functionally, as it stands. Those ripple effects will eventually hit us. They haven’t yet, but the longer this thing goes on, the more exposure that leaves to ports that are further away from the epicenter. Joe Maixner: Keep in mind, a lot of the stuff that is still shipping over into the Middle East is contracts that were put on the books before any of this started. We haven’t seen much interest on anything since the beginning of March going into that region, for obvious reasons. Ted Jacoby III: So, we’re not seeing any new contracts, but we’re still having conversations with our customers about how to fulfill the contracts that were on the books that were expected to ship at this time before the conflict started. Joe Maixner: Yeah. I think there’s going to be some pent-up demand the longer that this goes on. It’s gonna cause a pop in markets when this finally gets resolved because everybody’s gonna see that demand come back. Especially given the fact that the longer this goes on, the more potential for our markets to weaken because we’re not getting additional sales on the books and product out. So we could see a quick pop when things really do open back up. I do think it would take a while for that stuff to even roll through the system because there’s gonna be a backlog in ports and products still needing to ship anyway. So, expect more volatility. Tyler Jokerst: We’re currently going through an annual slowdown, too, in the Middle East. I think it’s Eid al-Fitr that’s going on right now during Ramadan. So, a lot of the buildup in exports is prior to that, with them trying to get all the product over there.  Just looking at last year, before we had any major geopolitical events happening, aside from tariffs, we would typically see a slowdown this time of year going into that region.  That’s a good point. Diego, what are your thoughts? Diego Carvallo: I know that energy is hugely affected by the Hormuz channel being blocked. But is food impacted as much as energy? I think the answer is no. I think most of the destinations where we take our dairy products are both from the U.S. and from Europe. At least access has not been blocked as bad as it has happened for exports of energy. So I’m just wondering if that impact on dairy is mainly caused by energy or just because it’s impacting fundamentals for our products. Ted Jacoby III: I know that Dammam is the big port in the Gulf for container ships. It’s a big oil port too, but there’s a separate container port, and then Bahrain and Qatar and even Dubai have their own ports. But then, Saudi [00:12:00] Arabia in particular has Jeddah and King Abdullah. And so, those two ports have taken over in the meantime. Tyler’s comment about Ramadan being in the rearview mirror is appropriate. This is the slowdown time with demand. And so we probably aren’t feeling the effect as much. I also think, from an energy perspective, the closing of the Strait of Hormuz is affecting other countries, like China, a lot more than it’s affecting the U.S. because we have, over the last 20 years, grown more energy independent because of the shale and fracking we’ve been doing domestically. And I think that has helped quite a bit. Joe Maixner: Oceania is at a severe disadvantage with this right now, too. I was looking at their energy prices and their diesel costs in Australia, for example. It’s the equivalent of $8.20 a gallon in U.S. terms. They’re really feeling the pinch, and I believe that New Zealand’s in the same boat, and that’s going to affect their shipping rates. Ted Jacoby III: All these huge container ships, what is their fuel? Diesel? Tyler Jokerst: Yeah. Ted Jacoby III: So, it’s just like trucks. They just buy a lot of diesel. So, if they’re dropping off in Australia, they’ve gotta fill up in Australia, where that oil costs a lot more than it does in other places. Mike Brown: I think this is all walking around the macro effects, and I think we need to talk about that. Let’s talk about the cost of producing food with what we’re doing to the urea, the nitrogen fertilizer markets, with the cutoff of moving product through the strait. Yes, a lot of it’s already bought; it isn’t all already bought. Between that and what we’re seeing with tariffs in Canada and their struggles with potash, we’re raising the cost of growing food because cows eat food just like we eat food. So, there are costs there that I think we have to think about. The other thing is these, particularly the Asian or even European, but Asia, ’cause that’s our export opportunities, those economies are so dependent on oil coming through the strait. And as those economies slow down, they tend to be much more price-sensitive about products than we are because they don’t have the incomes we have. Is that gonna slow down? Is that gonna cause a longer-term impact? If we see the world economy basically slow down, what will that do to dairy demand? Dairy is essential, but it is something cost-wise that they may be looking for other alternatives, particularly on the fat side. We can’t ignore that possibility. Right now, it looks good. Look at the butter market, today it recovered a little bit again. Prices, right now, for farmers are good. They can make money in current markets. But how much global slowdown will we see from this, and how will that affect demand for our U.S. dairy products, is still a concern of mine. Ted Jacoby III: We’re sitting here at the tail end of March. If this thing doesn’t show real signs of starting to wrap up in the next few weeks, I think there’s gonna be a tone shift in the general macroeconomic markets. There’s been a lot of talk: how is the U.S., and how is Trump gonna extract ourselves from this conflict? And we’re getting to that point where the length of time is becoming a very real issue. We haven’t quite got there, I don’t think. But I think we’re getting close. Mike Brown: Those of us who lived through stagflation in the late seventies, [00:15:00] it’s feeling a little bit too much like that right now. Ted Jacoby III: I would agree. In the seventies, gas prices caused it. Mike Brown: Oh, absolutely. And it was the conflict with Iran that caused some of that, too. Ted Jacoby III: Yeah. I think that the economy had already been set up for stagflation for other reasons, government debt being the big one, but you add this to it, yeah, you’re right. That’s very problematic in terms of getting the economy to function smoothly. Mike Brown: Government debt isn’t exactly our strong point right now. Ted Jacoby III: The only saving grace is that everybody has the same problem. You look at any developed country, and they’ve all got the same problem we do when it comes to government debt. Mike Brown: Yeah, they do. And if you’re looking at our export opportunities, that isn’t necessarily a good thing. There’s a lot to be nervous about right now. Tyler Jokerst: If you tie it back to dairy exports, the Middle East accounts for like 20% of all dairy exports in the world. They consume a lot of cheese. That seems to be a growing sector for ’em as well. For us, that hurts the bottom line. So it seems to be one of the biggest issues for us as a handler of dairy products. Mike Brown: One of the conversations at U.S. Dairy Export Council meetings this week was displacement. If the product can’t get there, who’s gonna buy it? That’s more competition for us because that’s the close-by market for Europe. They love it. It’s close, it’s efficient, but if they can’t get the product there, we’re gonna compete with them somewhere else. Ted Jacoby III: When it comes to cheese and butter, Mike, you’re spot on. We’re getting lucky on the non-fat side because Iran was a skim milk powder exporter. And that’s off the market, too. Mike Brown: If you look at prices powder’s not having a problem with finding demand. Ted Jacoby III: They aren’t. Mike Brown: A lot in supply. Ted Jacoby III: [Laughter] Tyler Jokerst: Alright. Tristan Suellentrop: We’ve all dealt with shipment delays before, but what’s the most absurd reason you’ve ever seen or heard of one being held up for? Tyler Jokerst: Oh, shipment delays. Yeah, the worst one I had wasn’t at Jacoby; we seemed to have it dialed in here. The worst one was from my previous employer. We hit a trans shipment point. Transshipment points are where you’ll have the steamship lines connect with another boat, and they’ll offload some of their containers to the other boat and continue. And it was something like a 40-day delay of just getting it from one boat to another that severely hurt us. This is one that we’ve had. During 2020, there were plenty of ’em. You looked at the ports of LA and Long Beach, and it could be 30-40 days. And these boats were just anchored off the shore and waiting to get offloaded. But because of all the causes and effects that we had with COVID, you ran into a lot of delays from that. That was a regular occurrence back in 2020 and 2021. Ted Jacoby III: Tyler, thanks for joining us. Really appreciate it. Great discussion. So thankful that you’re helping us navigate all this stuff in these very interesting times.  Thanks, everybody, for joining us today.
• 
  The Strait of Hormuz: What the Iran Conflict Means for Dairy Trade 10.03.2026 19min

  What happens to dairy markets when one of the world’s busiest shipping lanes suddenly gets disrupted? With the Strait of Hormuz under pressure and trade routes across the Persian Gulf in question, exporters are scrambling to figure out how to move product. What does all this mean for global dairy demand? In this episode of The Milk Check, host Ted Jacoby III sits down with the Jacoby trading team to talk through what happens when geopolitics collides with global dairy trade. We dig into: How exporters may reroute product through alternate ports like Jeddah Why trade flows could shift between the U.S., Europe, Oceania and Southeast Asia How energy prices and freight disruptions could ripple through dairy markets Whether this disruption boosts demand in the short term or destroys it if it drags on Find out how one shipping lane could reshape the global dairy trade. Listen to The Milk Check episode 95: The Strait of Hormuz: What the Iran Conflict Means for Dairy Trade. Click below to listen or find us on Spotify, YouTube,  Apple Podcasts, and Amazon Music. Got questions? We’d love to hear them. Submit below, and we might answer it on the show. Ask The Milk Check Ted Jacoby III: [00:00:00] Coming up on The Milk Check. The Strait of Hormuz is closed. The port of Dammam is closed. Joe Maixner: There’s definitely product that’s stuck, can’t get to its destination. Ted Jacoby III: Welcome to the Milk Check from T.C. Jacoby and Company, your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I’m Ted Jacoby. Let’s dive in. Today we’re gonna talk about what’s going on in the dairy market, specifically global trade. We’re recording this on March 6th, 2026, and seven days ago the U.S. bombed Iran.  As we [00:00:30] speak, the Strait of Hormuz is closed. The port of Dammam is closed, and trade flows are getting rearranged as we speak. Today with me, we have Joe Maixner, head of our butter trading book. We have Josh White, we have Diego Carvallo, and we have Mike Brown. And we thought it would be appropriate to discuss what’s going on in the Middle East, specifically how it’s affecting the dairy industry, and what its short-term and long-term effects will be on dairy demand. We’re gonna start with Joe. Joe, what are you hearing out there right [00:01:00] now? Joe Maixner: There’s definitely product that’s stuck, can’t get to its destination. Both going into Port of Dammam and other Middle Eastern ports for that matter. With butter’s moves over the past year, the Middle East market had been probably the largest growth opportunity for us in global exports for butter. Fortunately, this all happened after the rush for Ramadan to get everything in. So, I would say that it’s not as bad as it could be right now, but there is certainly product that’s stuck on the water looking for [00:01:30] alternative options to get to land. And there’s quite a bit of product that still is waiting to leave the U.S. that we’re not quite sure if and when it will actually leave. A lot of it’s still up in the air. Nobody really knows, what to do yet. I think it’s still too early to tell. Nothing’s been canceled per se, but the longer that this drags on, we’re certainly going to have some effects from it. Ted Jacoby III: There’s a lot of talk that maybe this war is gonna be a five to six week war. If the Strait of Hormuz is closed for five to six weeks, as is the [00:02:00] Port of Dammam, is that enough to cancel orders? Is that too long? Joe Maixner: I would say it should probably cancel some orders. I wouldn’t say it would cancel everything, but they’re gonna have to get product at some point from somewhere, They can’t completely stop. People are gonna have to eat. Production will still have to continue, and they’re gonna have to source product from somebody. And if we can’t get it there, they’ll find it from somewhere else. Ted Jacoby III: I’m hearing that one of the things that they’re exploring is shipping into Jeddah, which if you look at a map of the Middle East, Dammam is in the Persian Gulf on [00:02:30] one side of the peninsula. Jeddah is basically on the exact opposite side of Peninsula on the Red Sea. So they’re talking about shipping into Jeddah and then shipping it across the land to where it might need to go. The first thing that occurs to me is Dammam, I believe, is a bigger port than Jeddah. And so if you take all those container ships going into Dammam and send them to Jeddah instead, there’s not gonna be enough room to unload ’em all. And so, at the very least, the traffic’s gonna be pretty horrific. Are you guys hearing people working on that too? Joe Maixner: Yes, they’re looking at alternate ports of [00:03:00] entry and moving the product around. Jeddah is one. Casablanca is one. Going into Egypt is one. There are options. All of ’em are more expensive and it’s just gonna depend on how desperate the end user is to get the product. Josh White: We’ve got some experience dealing with trade disruptions over the past decade, and we tend to see the playbook similarly each time. And then when we talk about what’s specifically happened in our markets now, I think We can watch for some warning signs. Number one is in these type of situations, we start worrying about trade [00:03:30] flows, energy, freight, congestion, those type of things, all impacting markets and trade. Additionally, when we think about this conflict, there’s maybe three different scenarios to talk about. It’s very intense right now. Does that intensity continue for a very long time? What does that mean for our trade? It’s very intense right now for, but after, four to six weeks, maybe it continues on, but it’s more stable or consistent and the world learns how to trade around it. And then the third one is the one you [00:04:00] outlined earlier, which I think is a bit optimistic, usually these things don’t just go away that quickly, is that it’s over in a short amount of time. That’s the easiest one for us to project. That just creates a short-term concentration pent-up demand, pent-up shipments, and we just gotta work our way through that bubble. I think the middle one’s more likely. Not because I’m an expert on these things, but we’ve seen what happened in different conflicts in different situations. The middle one being it’s intense for a bit, then it becomes more consistent and normalized, and we just learn how to work [00:04:30] around it. What does that mean? And to me, that redirects trade flows. For instance, the U.S. has been very competitive in the Middle East for butter and cheese. It’s not the first time we’ve been competitive. We were competitive 15 years ago or so at a pretty good rate where we were an net exporter of butterfat, cheese I think we’ve been fairly consistent throughout, but it takes time to get there. Our biggest obstacle in doing business with that market versus Europe as a competitor, is the transit time. We inflate the freight rates, we increase transit [00:05:00] time, there’s concern of access to supply because of turbulence or stability, our price could be fine, and we could still miss some business because you have to buy now or you’ve gotta get product in now, or you just don’t have time to wait the, what, six weeks from order at minimum, probably more like a quarter, oftentimes, to get the product. That’s maybe our biggest obstacle right now is redirected trade lanes, not price. Joe Maixner: All of these trade disruptions create opportunity elsewhere. If our price comes off, [00:05:30] as it has, butter shot up earlier this week, it’s come back off here at the end of the week. It’s created opportunity for trade into other export markets. Where one door closes, another opens. Ted Jacoby III: How do you think those trade flows change? What comes, what goes, what are the changes that you think will happen? Let’s assume that the Persian Gulf is off limits for two or three months. What does that mean for dairy? Josh White: Lost demand, if it’s that long.  That’s lost demand. Now if we assume that we’re able to redirect product to [00:06:00] maintain the same demand, you’re gonna have trade lanes shift, right? What are the options? Ted Jacoby III: Let’s articulate this a little bit more for our listeners. When we’re talking about trade lanes shifting, right now there’s product on the water trying to head there that can’t. What’s gonna happen to those ships? That’s one. Two, there’s product that was sitting in the port about ready to ship. I think there were a lot of calls this week. I think we know of quite a few calls this week where they basically said, “Let’s sit on it. Let’s wait for this all to calm down before we actually ship it.” And three, [00:06:30] there’s product that maybe was scheduled to ship in a month or two. I think it’s fair to say, people probably have to figure out immediately what are they gonna do with the product that’s on the water right now. And I think the other two, they may be able to give it a little bit of time, decide whether or not they’re gonna cancel any orders and redirect it. Diego, the product that’s on the water right now, what do you expect happens to it? Diego Carvallo: Ted, I’ve been internally debating this for a while and even with the team. I think a few things are happening, but I don’t know which one has a bigger magnitude. Supply chains used to be very thin [00:07:00] for skim milk powder for the past year or two years. They are gonna have to build more inventory for those supply chains because product might take 60 days instead of 30 days to ship it. Product is gonna get stuck at the port of entry, port of shipment, in transit, et cetera. So, I think that bumps up demand artificially. Yeah. But there’s more product that’s gonna be stuck in the supply chain. That’s the first thing that comes to mind short-term, if this doesn’t continue to escalate. But if things continue to [00:07:30] escalate, and three weeks from now or a month from now, we’re still not being able to ship product to those destinations, product is gonna start backing up at ports of loading, right? So we’re gonna start hearing from the California manufacturers that they have a 100, 200 loads at port, and that prospects are not great for shipping, and that we should find new homes for that, right? I think if this gets solved the short-term, it’s positive for demand. It’s bullish market, but if it goes more long-term, you start killing demand, and you start needing to [00:08:00] find homes for additional product. But I know that everybody, at least on our team, has different takes on the whole situation. Ted Jacoby III: I would agree with that. I tend to lean to the side that, politically, the Trump administration can’t afford for this to go on too long, and the longer the strait is closed, the more political pressure they’re gonna have to resolve things. It’s realistic to consider that there’s a possibility that this thing goes on for a really long time, and that strait is closed for a really long time. Diego Carvallo: The second topic that I think we should talk a little bit about is what is a [00:08:30] psychological implication that this has on buyers? For example, on Chinese buyers who depend on products that go through that canal. That’s why I lean towards supply chains are gonna have to increase the amount of product they have, and end users are gonna change a little bit their procurement practices to increase their stocks. Yeah. Josh White: That happened post COVID, right? And didn’t last very long. Ted Jacoby III: I’d say it lasted two years. Josh White: But my point wasn’t that two years wasn’t a long time. It [00:09:00] was more of: they reverted back to the just-in-time model once things stabilized. Ted Jacoby III: Yes. That is a good point. I do agree with that. But you know what, even though they reverted back to the just-in-time model, two and a half months ago, prices were low enough that I think there were people trying to rebuild their stocks because they felt that prices were low enough to do that. I don’t know if they actually succeeded. My gut, based on what we’re hearing from customers right now, is they didn’t, but there was certainly a willingness to build back inventory levels if the price was right. In the [00:09:30] meantime, we’re dealing with disrupted trade flows. And so my second question for you guys is, we talk about disrupted trade flows, but let’s put some examples under that so our listeners understand what we’re talking about. How will these trade lanes shift? Where will product flows change? Will we see maybe more U.S. product going into Southeast Asia, more European product going into the Middle East, because perhaps they can put it on a truck and ship it through Istanbul by rail or by truck all the way there? I don’t know. Josh White: Yeah, I [00:10:00] think that’s a super good point, and it goes into what Diego said, which I don’t think is limited to nonfat, by the way, or milk powders. I think customers need to buy, and are used to getting what they need quite easily, and they’ve run their structural days in inventory down quite a bit to where that’s going to require people to buy from where they can get it quickly. This disruption has served as a bit of a catalyst to something I think was already materializing or happening. And now if you inflate freight rates a little bit more, that’s only gonna make it that [00:10:30] much more pronounced: that you need to buy from who’s close. New Zealand’s having a good back shoulder of their season, too, and I believe that there’s quite a bit of New Zealand product that is on its way or destined to go to the Middle East and North Africa. So when we think about what happens, I think everyone goes back to their closest trade partner. That takes the Oceana product to Asia. It takes the U.S. product, obviously, to Mexico. There’s at least some risk that European product was gonna come to Mexico. This is making that more difficult, I imagine, as [00:11:00] well. And I guess they’re gonna have to problem solve if that demand holds under the scenario we talked about earlier: that Europe’s got a lot of product right now. There’s a lot of milk, and they’re making a lot of everything. And thus far, it’s been okay because exports have been reported to be good. Maybe we’re talking about how this impacts the Americans, but I imagine that the impact might be a little bit more extreme for the Europeans. There’s another impact in there that I think Diego touched on. When you have commitments for product [00:11:30] and that product takes longer to get to you, and you’re running your supply chain thin, you reach out then and buy other product at a higher price, often, to fill your immediate demand. And once everything stabilizes, you actually are structurally oversupplied. We experienced that within recent history. Ted Jacoby III: Oh, absolutely. Josh White: And so that creates that air pocket in demand that will eventually arrive. We just don’t know when. Ted Jacoby III: What I imagine is, those boats that are on the water that were heading to Dammam when all this [00:12:00] started, they’re either parked right now, waiting to see if everything clears up, or they’re getting themselves rescheduled into Jeddah to try and figure out how to get there another way.  I would assume the product that hadn’t been loaded onto a ship yet is backing up at the port for a little while. How long do you think it takes? How long do we need to be watching this conflict continue to go on, watching the Strait of Hormuz continue to be closed, how long will it take before do you think they’ll start selling that product elsewhere? Canceling contracts and selling it elsewhere? A [00:12:30] month, two months? Because my gut tells me that’s when you really start seeing the market shift around. Right now, everybody’s just in a waiting period. Right now everybody’s just wondering if this thing’s gonna last a long time or a short time, and they don’t wanna overreact just for everything to clear up in the next week or two, even if the possibility is low. Josh White: Nonfat futures are inverted, so I would imagine, not very long at all, but I don’t think nonfat is the most impacted product here.  The curve on the butter futures has really flattened out as well. There’s not a long time window there either if we don’t put [00:13:00] a decent carry back in the market. Ted Jacoby III: So the market is already pricing in the possibility of this going on a long time, but the cash markets haven’t really fallen yet because there’s still hope. Maybe that’s a good way to put it. Josh White: It’s only been a week, one business week. That’s a big conclusion that our team had, earlier today, is that we came in Monday, following the announcement, and we’re like, okay, what happened to dairy? And the reality is everyone’s trying to figure it out and it’s gonna take some time. So I don’t think we’ve seen the reaction or response to the [00:13:30] situation actually materialize yet. Ted Jacoby III: Do you think that the question everybody should be asking is how long is it gonna take for the Strait of Hormuz to open? Joe Maixner: That’s a big caveat in this whole situation, right? Once that opens and trade flows resume, that clears a lot of things up. Regardless, it’s gonna take time to clear up, right? Because you’re gonna have a backlog, but the sooner that reopens, the sooner things pseudo get back to normal. Mike Brown (2): So much energy flows out to that strait to the rest of the world, particularly to Asia that it could affect incomes effect ability to [00:14:00] purchase products as well. It isn’t just bringing things in, it’s how they get the oil out. Question for Diego, Iran certainly makes some SMP. Do you think that has any impact at all? Diego Carvallo: That’s a really good point you’re bringing up, Mike. Iran had for the past five years ramped up their SMP experts significantly, so I believe, if I’m not wrong, in 2025, they exported something like 120,000 metric tons of skim milk powder. It’s obviously not [00:14:30] one of the biggest exporters in the world, but it’s a significant exporter. The most important takeaway is that they would supply those markets that are being affected by these interruptions the most. It’s not only that region has fewer access to European and American and even New Zealand sources, but also one of their main providers has an active block on food exports as of right now. Both things tell me it’s gonna be harder for demand to [00:15:00] get access to the product. If it extends this issue in time, this is definitely gonna kill demand. Ted Jacoby III: Let’s talk this through. The longer this goes on, what are the countries that are really gonna start seeing drops in demand because their revenue is dropping. Obviously Iran, I think you gotta include Iraq, Saudi Arabia, Kuwait, UAE. Joe Maixner: Yep. Ted Jacoby III: I think China, too, because they don’t have the access to energy. And maybe some of the other major importers of Middle East oil. Now, some of it will switch, probably go [00:15:30] outta Jeddah, but I don’t think there’s a lot of oil exports leaving Jeddah. I think it’s all in the Gulf. Joe Maixner: What does it do for European product though, given the fact that this is going to cause a spike in natural gas pricing. This is gonna cause a spike in all energy pricing.  When the whole Ukraine situation escalated and Europe lost access to gas, it would cost something like $500 per metric ton just to dry the product because of [00:16:00] the increased cost of gas. That put a lot of pressure onto the skim milk concentrate, and it gave a lot of support to skim milk powder. Diego Carvallo: I think something similar is gonna happen in the coming weeks because we all heard the news about if I’m not wrong, it was Qatar that just shut down the world’s biggest LNG plant. And it takes, I believe it’s 40 days for it to be back online at full operations. It’s not a one or two day interruption. It’s a [00:16:30] substantial interruption in the energy supply at a worldwide level. Ted Jacoby III: The one big difference between when we’ve seen gas prices spike in the past, and this time is in the past, when energy prices spiked, demand in the Middle East would actually go up because they’d have more revenue and more income. They don’t this time around because it’s spiking because they can’t be the exporters and make those sales. I think that’s important to take into account. You’ve got a scenario where if this goes [00:17:00] on long enough, I think there’s some real negative effects on demand that we’ve gotta start coming to terms with, I don’t think that matters if everything opens up within the next two to four weeks. We’ll see if that happens. Mike Brown (2): Generally, this administration has responded to economic pressure. We see what’s happening in the stock market and we see what’s happening with energy costs, they’re gonna be rethinking hard on how long they want this thing to stretch out, regardless of what maybe some of our partners would like it to be. There’s gonna be some strong economic pressure internally. Even the Senate, who voted to support [00:17:30] continuing the fighting in Iran did say, we’re good for now, but we’ll revisit this if we need to.  That pressure by the day is gonna keep going up. Ted Jacoby III: I’m a hundred percent in agreement with you, Mike, and that’s why my hunch is you’re not gonna see the strait shutdown for an extended period of time. But we don’t know. We’ll have to wait and see. Hey, thanks guys. That was a great discussion today. It remains to be seen how this plays out. This is something that absolutely bears watching because it clearly is going to have some effect on dairy demand. We will see. [00:18:00]
• 
  The Dryer’s Getting Robbed 02.03.2026 33min

  Flush season is here. Protein solids are up. Global milk production is up. So… Where’s all the skim milk powder? In this episode of The Milk Check, host Ted Jacoby III and the Jacoby team sits down with Martijn Goedhart and Henk-Jan Bouwman of Cefetra Dairy for a European perspective on the volatility rippling through global dairy markets. We talk through how traders got caught short and why the spring flush might not loosen up the skim milk powder/nonfat dry milk market. Plus, are we pricing U.S. out of the export market? We’ll get you up to speed on: Why skim solids are being pulled away from dryers and into protein streams How hand-to-mouth buying turned into a short squeeze What record-high butter stocks in Europe mean for upside potential Tune in to hear how Europe and the U.S. are navigating one of the most volatile stretches in recent memory. L If you’re making sourcing or coverage decisions right now, don’t miss The Milk Check episode 94: The Dryer’s Getting Robbed. Got questions? We’d love to hear them. Submit below, and we might answer it on the show. Ask The Milk Check TMC-Intro-final Ted Jacoby III: [00:00:00] Coming up on The Milk Check. Martijn Goedhart: You have supply growing, and then you think, “Oh, we’re gonna build stocks.” But then, demand caught up. And quite viciously. Ted Jacoby III: Welcome to the Milk Check from T.C. Jacoby and Company, your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I’m Ted Jacoby. Let’s dive in. This week we are excited to have two special guests, Martijnjn Goedhart and Henk-Jan Bouwman from Cefetra Dairy in the Netherlands. We’ve been working closely with these guys for some time and we thought it would be a great idea given all the craziness and dairy markets going on in the United States, to ask them to give us a little bit of perspective on what’s going on in Europe so we can get a feel for how the global markets are affecting our U.S. dairy markets. Martijn, Henk, thanks for joining us today. Martijn Goedhart: Thanks for having us, Ted. Henk-Jan Bouwman: Thank you, Ted. Ted Jacoby III: I feel like what’s going on in nonfat right now more has an origin in the U.S., but I also noticed that you guys started to feel that maybe this market was gonna be a little bit shorter than we expected over in Europe before we realized it in the U.S. [00:01:00] Tell us about the skim milk powder market in Europe and what’s been going on the last month. Martijn Goedhart: In Europe, we’ve been overwhelmed by milk production growth since the second half of 2025, due to bluetongue, late calving, second peak, as some of us call it. And that has resulted in good outputs, and that output needs to go to the commodities. So, we’ve seen butter stocks build up significantly, and everyone assumed that that would mean that the skimmed stocks were also building up because that’s basically the other product you’re gonna produce when you do butter, right? A few things we, I think, overlooked is like the general protein trend in the world and the demand for protein, both on the whey side as well as on the milk side nowadays. So a lot of protein has ended up in other products than your typical skimmed nonfat production bucket. Adding to that, Europe has been the most competitive source in the world market for a long time. Demand wasn’t great because buyers were buying hand-to-mouth because they would basically wait for that carry to come toward them and buy at the lowest price at the last moment. But [00:02:00] now we see that the exports out of Europe have been great. And that’s been keeping the market clean. I think some traders speculated on lower prices and got caught short, basically needed to cover. And that’s where we are at now. And I think more than ever, if you look at NZX (New Zealand Exchange), this all started with a firmer GDT (Global Dairy Trade), with China stocking up a bit. So, if you look at NZX, CME (Chicago Mercantile Exchange) and EEX (European Energy Exchange), those markets are starting to correlate better than they did before because everyone’s looking at the developments of the other exchanges and then draw their conclusions for their own home base. And yeah, that cocktail, together with some U.S. developments that we’re gonna dive into, has caused record-high volatility over the last few weeks. Ted Jacoby III: So, Martijn, you’re telling a story that sounds very familiar ‘ cause that’s exactly what we’ve seen here in the U.S. We’re not making anywhere near as much nonfat dry milk as we expected because the protein demand is forcing those skim solids into other places. What are those other places in Europe? Where is that protein being used and what is it being made into in Europe right now? Martijn Goedhart: I think there’s two main [00:03:00] streams. Bear in mind that the milk pressure in Europe was so high that you need to burn milk, and the way to do that is to produce casein. So, I think casein production has increased by like double-digit numbers, that’s not because it was such a nice valorization, you can just dry more milk per hour. And considering the liquid markets over the last few months, during our low season, liquid milk was trading way below the commodity equivalent, proving that there’s a surplus of liquid milk that can’t be processed by drying it or churning it. So, that’s one part. The other part is, it’s the same in the U.S. We’ve been around here for a few days now, but in Europe, you see the same: everything is protein fortified, extra protein, in basically everything you can buy. So, a lot of protein that is processed in line before it even reaches the other class. So, like the dryers basically. Ted Jacoby III: Martijn and Henk, do you guys think that the skim milk powder market in Europe has tightened up primarily because everybody who was living hand-to-mouth saw the market started going up, and they decided they wanted to buy more now because they wanted to get the product at a lower price before the price [00:04:00] went higher, and then they just started chasing the market? Or do you think demand has shifted and there’s a true increase in the demand for the product? Henk-Jan Bouwman: There’s two things to touch upon here, Ted. One is, you’re absolutely right: people were buying hand-to-mouth, and they were actually rewarded for doing that because everybody believed that the price of tomorrow was better than the price of today. And for a fairly long period of time, they got rewarded for that. That also led to traders being short, as Martijn touched upon. From a demand perspective, yes, there’s actually quite some demand, and people also realize that they have to turn to Europe to find their cheapest skim. That also creates a bit of a demand pull towards European skim, which makes the price go up. And we’ve seen that, in particular, in low heat in comparison to medium heat. But in general, export markets for us are pretty strong, and, I would say, pretty much all the demand ends in European skim milk powder of origins. Josh White: Is anybody extending days in inventory? Do we think that there’s a short squeeze driving international clients to buy a couple extra weeks, a month, more than that of product? The nature of your question, Ted, [00:05:00] is what’s caused us to tighten up on that product? Is it truly demand for nonfat dry milk, or is it just reduced production overall? And I think maybe it’s both in a way. On the one hand, Martijn mentioned that the catalyst of this was actually a GDT event where China stepped in and bought more. And I think that we’ve been talking about the disappearance of China as a structural buyer of milk powder for quite some time. But their stocks to use ratio has been reported to be fairly low, and maybe they felt it was time to extend some days of inventory. At the same time, you evidenced what’s happening in the U.S., And Martijn alluded to it a little bit in Europe as well, that the pull for dairy protein in general is actually vacuuming some solids away from the dryer, and particularly the SMP or the nonfat dryer. So, is it both? Are we seeing people look to build a little bit more safety stock at the same time that our production is down a bit because protein demand overall is robbing our supply. Henk-Jan Bouwman: There’s a, there’s a couple of things to touch upon, Josh. One is in this whole upward movement, there were quite some international buyers [00:06:00] who still had demand open, for instance, for Q2 and Q3, and decided to step in and said, “Hey, this is a moment to buy, to cover that demand, because I am anticipating an upward movement.” So, in that sense, I’m completely with you. Producers did the same, as well. For them it was also attractive to lock some forward sales. And that has led to lesser availability of skim in EU. And that basically also caused the rally to continue. Martijn Goedhart: I think the difference with the U.S., as I understand it, is we have never not been able to buy product during this whole volatility. So, producers were always offering, customers would like step in, step out. If they really need it, they would book. They were also cautious. And we went up, then we went down, then we went up again. But in that down movement, customers were like, “Yeah, you see, so it’ll come off again.” So, that didn’t prompt them to build any length. I think producers did fairly well in putting a fundament below their sales book for the flush that’s upcoming. Traders are holding a fair bit of cash product right now for the next three, four months. It’s not tight as [00:07:00] such, but you see that certain buyers need certain origins that are scarce. So, it’s very much about the origin, the spec, and the product that you have, whether you can monetize on those higher prices. Ted Jacoby III: It seems to me, just listening to you guys talk about Europe, that the U.S. and Europe are both experiencing a very similar phenomenon in our supply chain. Demand for protein is pulling skim solids away from the dryer, first and foremost, which means on a skim milk powder / nonfat dry milk supply-demand balance, you’re reducing the supply even though we are both experiencing pretty significant increases in milk production. The traditional math is: more milk means more skim milk powder. It didn’t happen this time around, and it caught people by surprise. The demand for protein in Europe, just like in the U.S., is exceptional right now. But then that makes me ask the question: if we have less skim solids, in the form of skim milk powder and nonfat, in the global supply chain, is this increase in price directly proportional [00:08:00] to reduced supply, so we got more people buying because they want to get in the front of it. So, you got this bubble. But you also have had this slow decrease in overall skim milk powder demand going on. Like a slow creep every year. I’m not sure if it’s about 1%, but we’ve all kind of felt it that the global demand for skim milk powder has been just slowly weakening, but this sudden supply crunch was a bigger issue than the slow decrease in demand, and it caused this price bubble that’s just gonna take some time to work itself out. And if the protein continues to take the skim solids away from the dryers, it may be a really long time before it works itself out. Martijn Goedhart: Q4 of global SMP export has been very strong, but Q3 and Q2 were relatively weak. I’d have to look at how the balance looks at the end of the year. Also, the export figures have been more volatile than Ted Jacoby III: Yeah. Martijn Goedhart: Before. So, I think everyone thought like, “Okay, demand is sluggish. We have so much milk in the U.S. We have so much milk in Europe. [00:09:00] New Zealand’s season is looking good.” So, in your mind, you extrapolate that demand. Then, you have supply growing, and then you think, “Oh, we’re gonna build stocks.” But then, demand caught up. And quite viciously. So, that’s the thing I think people underestimated. We’re in a situation where we don’t see any old stocks or inventories building up. Josh White: So I wanna throw three thoughts out. On the first hand, we know our global milk supply is year over year up significantly. Martijn Goedhart: Yeah. Josh White: On a solids basis, protein and fat are up significantly. We’re talking about the overflow valve, the powder stocks not being very robust, and that on the end-user level, globally, people didn’t have a lot of additional days of inventory. So, that would suggest on one hand, maybe we need all this milk. Maybe we need it. Demand for protein and other products is up enough that we need all this milk. But then on the other hand, I think there’s probably two things that we need to be careful that we don’t overreact to. There’s seasonality in our products. We know that the northern hemisphere heavy milk production season is upon us. We’ve [00:10:00] started in California. We’re gonna continue to see our daily milk volumes increase seasonally in the U.S. as we get into the second quarter. Another thing that I’m wondering being, you guys with more international trade experience coming out of Europe is: buying seasonality. So, Ramadan every year moves up a little bit; Chinese New Year, there’s usually a surge leading up to it. And it’s gotten to the point where that was almost a collision with the traditional holiday season of December. Is it possible that we just robbed demand from the first quarter, and everyone tried to get in front of some of that demand in the late third and early fourth quarter, and that we’re about to go into a unique seasonal period where customers have now gotten scared. They’ve extended a few days in inventory, the structural demand won’t be there at the same time that the northern hemisphere flush is upon us. I mean, is it possible that we were just short squeezed based on seasonal issues in the first quarter, and we’re gonna resolve that with plenty of product in the second quarter? One final note I think that we [00:11:00] shouldn’t forget is that our year over year comparables are against a disease-infested 2024. We had bird flu in the U.S.; we had bluetongue to in Europe. How much are we actually over 2023 going into 2024. Ted Jacoby III: On 2023 versus 2024, I think Europe, you guys were down like a half a percent to 1% in 24. Does that sound about right? Martijn Goedhart: 23, 24 was pretty much flat. Ted Jacoby III: Mm-hmm. Martijn Goedhart: And 24, 25 we added like a hundred thousand metric tons. So, like, 6%, 7%. 24, 25. Ted Jacoby III: So you guys had a couple of flat years, followed by a year where you added quite a bit. Martijn Goedhart: Yeah. Ted Jacoby III: Which actually is pretty similar to what happened in the U.S. Yes. We had some disease like avian flu , and bird flu hit California ,and we were down in some places and up in others, but overall we were flat. But the solids were up a little bit. Martijn Goedhart: Yeah. Yeah. Ted Jacoby III: While dairy prices were decent, I didn’t feel like we were facing a massive supply scarcity in those two flat years, which is one of the [00:12:00] things that has me very perplexed about what’s going on now. Because it’s one thing to say, Hey, there’s all this new demand for protein. All the skim solids are going to protein, and that’s why there isn’t any skim milk powder in nonfat. Okay, let me phrase this a different way. That means that we are suddenly being faced with massive increases in demand for protein. The price of protein today is a lot higher than it was a year and a half ago when we were dealing with flat supply.  So, why is protein demand so much higher now compared to a year ago? Is it completely and solely demand driven? As amateur economists , like all traders are, that math doesn’t seem right. Martijn Goedhart: Last year, we had significant competition among our export customers from Iran and Belarus, in terms of SMP. The Iran exports were surging. I think it was like 150,000 tons of skim, something like that, that suddenly shows up. Europe is doing about 700. So, that has an impact when you’re talking to [00:13:00] buyers. But that disappeared just as quickly as it appeared. Which yeah, that 150,000 tons, or whatever it was, it will turn back to the next cheapest origin, which was Europe. So, demand didn’t grow, but shifted towards another origin being EU. Henk-Jan Bouwman: Yeah, I think in general, overall competitiveness of EU skim milk powder is a lot better than last year, even in comparison to a bigger skim producing regions. As Martijnn touched upon, being based in the Middle East, I saw a lot of competition coming out of origins, which were a bit more nontraditional. Iran was one of them. What happened is their overall competitiveness finished really, really quickly due to a couple of things. One of them being disease. So, they had foot-and-mouth disease in Iran. Two, their overall ability to import a sufficient amount of feed, and three, their competitiveness due to a currency standpoint, which quickly changed. That, indeed, meant that the material that was supplied by Iran is now being supplied by Europe. Diego Carvallo: It’s a fascinating situation. Some of those [00:14:00] solids that are going into MPCs are definitely reducing the demand for skim, unless it’s coming from a different end-user application. If we’re seeing the MPCs going into sports nutrition, it’s definitely new demand that is finding a new end-user. It’s a combination of a lot of the things that we have discussed in this call: the whole market being short and getting super used to being hand-to-mouth for years, where you could buy product cheaper a month from now, so, why would you buy it? Especially if you have high interest rates, right? So, that’s part of it. The other factor is definitely the whole market was shocked by the impact of the UF pull of the additional MPC production and the amount of solids that we’re not going into a dryer that everybody expected would go right. Also a few additional manufacturing productions, a few key plants in the U.S., this is starting to look like more of a fundamental shift than a short squeeze. [00:15:00] And three weeks ago, everybody was saying, “Yeah, short squeeze, it’s an amazing short squeeze. It’s gonna come down.” Right? And now that same rhetoric has been changing to, “Actually, this is not that much of a short squeeze, but it is more of a there are not that many solids.” There’s a new big plant in Texas. There’s a new big plant in New York. There’s a lot of solids that are being pulled, and nobody was taking that into account. Everybody was expecting after the bird flu in California, we’re simply gonna go back to producing the same amount of nonfat that we were producing two years ago. And if you look at the data, it’s not correct, you know, Josh White: We also gotta give credit to substitution and other things. And what I mean by that is like calf milk replacer industry in the U.S. Historically, we’ll toggle for the cheapest protein between whey and milk powders. For sure, we’re seeing that appetite pick up for nonfat dry milk right now. Whereas two years ago there was a lot of WPC 34 on the market. All of that’s gone [00:16:00] because of the whey movement. I think the utilization is shifting quite a bit. We’ve talked about where it’s more difficult to track where milk solids are being consumed into a lot of protein enhanced beverages and things along those lines. That’s becoming more difficult. We’re saying demand’s not great globally, but if you pick up feed demand because they can’t buy the whey products they bought before, that is more demand for milk powder. And by far the cheapest dairy protein right now is nonfat dry milk. The big question I have is seasonally in the second quarter, are we going to catch up? Are we gonna be able to catch up globally or not? I think the whole market’s really struggling to try to form an opinion on that. Mostly because we can’t really measure and put a finger on just how much new protein-related demand there is in that difficult to measure space that I alluded to earlier. Diego Carvallo: Particularly in the U.S. right? In Europe doesn’t seem like that situation is as strong as it is the U.S. It seems like in the U.S., you have all of these new [00:17:00] cheese plants and UF plants, Class I plants, et cetera. It seems like, at least in the U.S. that inventory building is gonna be more difficult than in other regions. Josh White: And the European dryers are full right now, correct? Martijn Goedhart: Yes. Josh White: And the California dryers are full right now. Midwest dryers are nowhere near full. The answer to that might be a little bit easier than we’re making this discussion. We’ve added a whole lot of cheese capacity. There’s plenty of milk, but a lot of it’s being processed into cheese. Ted Jacoby III: Are there many new dairy plants of any kind in Europe right now? Martijn Goedhart: Not coming online this flush as far as I know. Not surprisingly, but most of the investment obviously is in WPC and WPI, I think Friesland has a big plant coming up, but it’s 2027, am I right, Henk-Jan? Henk-Jan Bouwman: Their latest expansion is 27. Yes. Ted Jacoby III: So we’re not really seeing any milk solids going to new places in Europe. It’s all still within the traditional milk sheds going to the usual suspects. Martijn Goedhart: Yeah. Yeah. Ted Jacoby III: Okay. Let’s switch topics to butter. The [00:18:00] U.S., a year ago, a year and a half ago, we were around $3 butter. It came down into the 2s, $2.50ish, and then the bottom dropped out, and it went all the way down to, I think, $1.28 at one point in the U.S. Now it’s back up in the $1.70s. But Europe dropped even more from an even higher precipice. Where have we been over the last year and where’s the butter market now in Europe, and what’s it doing? Martijn Goedhart: Yeah, well, butter was the main driver of the volatility that we see right now because €7 butter prices, the fed and the milk would already pay an above break-even price to farmers. And then your skim return is just bonus, right? Friesland just released their yearly report and they’ve been paying like, I think 56¢ on average, which is, well it’s a bit debatable, but I would say at least 16¢ above break-even. And then they get even a bit more profit share. That has like sparked that extra milk output, because every liter you produce is making you money as a farmer. You wanna get your components up, you wanna squeeze the maximum out of the milk. That’s how we ended up in this situation and the vicious correction at the other end of it that [00:19:00] we’ve seen. We’ve seen inventories build up and anecdotally we’ll also hear that all the chilled storage is full. That’s still the case. Those stocks haven’t disappeared. And also we’ve imported quite a bit when the spread with the U.S. and before New Zealand was significant enough to do so. That product is arriving now. And that adds to the supply pressure. However, that market has been stable for the last few months. I would say it’s been volatile, but we’re at the same levels than one and a half, two months ago. So that also shows that price correction ultimately also triggers extra demand. It’s an elastic product, especially on the consumer side. However, it’s also capped in terms of upside because those stocks are there. The liquid equivalent, cream, if you would buy cream today, you’d make it into butter. You’d be like at €3.30–€3. 40 cost price where the market is trading at €4.20–€4.30. So, there’s like a thousand euro. Ted Jacoby III: So the multiples in cream are low. Martijn Goedhart: It has been like this during our whole down season, which is very atypical. You could [00:20:00] argue that that multiple is only gonna weaken because milk starts flowing. Ted Jacoby III: Mm-hmm. Martijn Goedhart: The main discussion we have is like, is all that bearishness already priced in? And have we hit the bottom? Have we hit a level at which people are happy to buy? Or is there more to come? Ted Jacoby III: So you guys aren’t really seeing much upward-ness in the butter market in Europe right now? Martijn Goedhart: No. No. If you look from a, let’s say, traditional supply and demand theory, we have record-high stocks and record-high stocks, they basically kill any prolonged upside to a market, I would say, until you work through it. Ted Jacoby III: What about the cheese market in Europe? Is the cheese market high or low right now? And how’s it acting? Martijn Goedhart: It’s surprisingly tight. You would think that especially over the past few years, quite some capacity has been added to the European landscape. You would reckon that this extra milk would flow into the cheese plants, and you can’t find demand for it, so you’d have to move your cheese, and you’d see supply pressure from producers. But, the opposite is true actually. The cheese that’s supplied is very fresh. Within the range of what you can supply, it’s on the fresher side. That [00:21:00] indicates that there are no older stocks or backlog in terms of supply. I think producers have done a good job in capturing those moments when they were competitive on the world market by getting to make cheese disappear out of Europe. And then the last few weeks there were some production disruptions, some factory outages, and that even caused a bit more tightness in the cheese market. But it has stabilized ever since. It has been stable like butter. We’ve seen the bottom for now, and it went up a bit. The only thing is that in cheese there are no inventories. That makes you think that there’s more upside in cheese when milk growth starts to slow compared to butter because there’s no inventory holding it back. Ted Jacoby III: Why isn’t there any inventory? Was Europe doing some really good exporting for a while? Martijn Goedhart: Yeah, that’s the main reason. Big producers did big sales of gouda at some point or mozz when they were competitive, just to keep that supply chain clean. Butter, you can freeze, carry if the market pays for it. Ted Jacoby III: Mm-hmm. Martijn Goedhart: Cheese, you can only do it on paper, but not in reality. You need to get rid of it. Ted Jacoby III: Right. Josh White: How far out do we think the [00:22:00] international cheese buyer is covered right now? Because that was a big topic coming into the first quarter is how much of the cheese business, particularly in contestable markets, did Europe win away from the U.S. Ted correct me if I’m wrong, but our exports have been fine, haven’t they? Ted Jacoby III: Our exports have been fine. That’s actually a good way to put it. We experienced a real nice pop in exports last year. I would say this year, second half of Q4 into Q1, we’ve experienced exports that were relatively similar to last year. Maybe a hair behind. And I think we’ll start seeing those numbers soon, but I wouldn’t be surprised that when we finally see January export numbers, we’re down like 5% versus last year, when last year was a really, really, really good number. I’d almost say down 5% is unexpectedly good relative to how good it was last year. Martijn Goedhart: Josh, coming back to your coverage question, I think both our markets have seen massive carries right over the last few months. So, that’s not a very interesting structure for buyers to cover long. Our market was [00:23:00] trading like spot plus two months maximum. And producers would only make big sales if they have the product already, if they feel it already a little. So, I would suggest that cheese buyers in Europe, as well as around the world, are relatively shortly covered, just the same as with nonfat. Henk-Jan Bouwman: Yeah, I see the same in my export markets where basically all the inquiries we are getting for cheese, are relatively close to home, so maybe one maximum two months out from a shipment perspective. Ted Jacoby III: Mm-hmm. Josh White: So, Ted, are you interpreting this though, that the pressure’s gonna be on more so in the U.S. to win that business going into the second quarter? Based on what you just heard from our European friends? How are you digesting this discussion? Ted Jacoby III: That’s a great question. I would say yes, but price action makes me wonder if the U.S. is trying to price itself out of this market. Martijn Goedhart: Take cheddar for example. EU is about $300 per ton elevated over U.S. So, in certain applications, such as process cheese, I think, by default the U.S., will win that export business. Ted Jacoby III: Even [00:24:00] at current futures prices for April and May of a $1.80? Martijn Goedhart: Little bit of a different story. But that also depends on the outcome of European flush and the effect of that flush on cheddar pricing in Europe. Ted Jacoby III: I would agree with you that about three weeks ago, we were cheaper, but after this rally, I don’t know if that’s still true. Josh White: The point Ted’s driving home right now is the big carry in the Class III cheese markets in the U.S., you’re concern is pricing out the second quarter? Ted Jacoby III: That’s exactly right. I’m concerned we’re in the middle of pricing ourselves out of the market. Josh White: Are we putting ourselves in a spot where we’re the best priced cheese product. We know, out of the U.S., our daily milk volumes are gonna increase. We know that a lot of that milk’s gonna go into cheese. We know that we’re gonna have to compete for cheese business. But even despite the fact that Europe’s relatively balanced, it feels like on cheese, are we putting ourselves in the global market in a position where Europe may win? Martijn Goedhart: It’s gonna be a good fight, Josh.  None of the origins can afford to lose a lot of export business over the flush. We need to get those volumes [00:25:00] moving. So, the products where we compete, we will compete. Ted Jacoby III: Mm-hmm. And here’s what’s likely to happen. The U.S. having a little bit more mature and developed futures market means that as Europe goes out there and makes sure they get that business, the U.S. at some point will say, rather than going and exporting this cheese, I’m just gonna put it in a warehouse and hedge it out on the futures because there’s a carry in the futures market right now and I can make 10¢ just sitting on it for a month or two. If we are gonna have to go head to head with Europe, to get that export business, we might not get as much as we did last year in the second quarter, because in the second quarter we really did get a lot of that cheese export business. Martijn Goedhart: I agree. Only, to what extent can you actually carry it, physically, without refreshing, Ted? Because in Europe, that’s a bit of an issue. Ted Jacoby III: In the U.S., there’s a number of strategies, a lot of it being rolling your inventory. So, you take your working inventory and you just start rolling it because I don’t think there’s a huge difference between 30-day-old cheddar and 90-day-old cheddar to a lot of people. There are strategies to [00:26:00] manage through higher inventory levels. But at a certain point, even that working inventory carry, it starts to max out the warehouse, start to get full, and then they just gotta sell it. Martijn Goedhart: Right. Ted Jacoby III: What’s interesting is, I think that a lot of people went into 2026 thinking, “We’ve gotta make sure we’ve got a home for this cheese, because there’s a lot more cheese, and the U.S. market demand is not that great. It’s very flat. And so, if we’re gonna make 4% or 5% more cheese, we’re just gonna have to export it.” Martijn Goedhart: Yeah. Ted Jacoby III: And so, they weren’t even looking at that equation. But I think what’s happened in the last month with this volatility in the market, it’s gonna have the inverse effect of getting everybody to actually sit on that cheese and keep it at home, and you’d think it would be the opposite, but no, I think we’re gonna end up bringing more cheese home and letting you win some of those battles. Josh White: Ted, can we talk a minute about the milk production outlook in both regions and how that’s shifted a bit over the past month or two? I’ll start within the U.S. We generally believe that the margins have not been squeezed to a point where we’re gonna see a massive [00:27:00] supply response, a negative supply response in the U.S. for the foreseeable future. Ted Jacoby III: And the bounce off The bottom, if anything, we may be back into a place where we’re encouraging more production. Josh White: We’ve got some big comparables. There’s maybe some vulnerabilities in the market. We’ve obviously been surprised with disease and other things in the past, so it’s not imminent, of course, but the math says we should expect to continue to have a good amount of milk out of the U.S. going forward. How does that look out of Europe presently? Martijn Goedhart: I would say almost copy paste Josh. Skimmed has bounced back. Butter has stabilized. Cheese has stabilized up to a point where if I look at the valorization of gouda at €3,300/MT you’re well above the 40¢/kg mark, which is basically the pain point for European farmers. And then I’m taking into account sweet whey. Not even WPC, right? So, if you have your WPC return, that’ll add another few cents at least. So yeah, we didn’t go deep enough to encourage any decline in milk production. The big question is how that’s gonna turn out this year: if we see the same curve or more [00:28:00] corrected to normal seasonality. But from a margin perspective, I think, just like Ted said, we bounced off the bottom, and it didn’t hurt enough or long enough for anything structural to change in 2026. Josh White: Hey, Martijn, would you add a little bit of color to what you just mentioned a moment ago? The two flush situation coming from the bluetongue outbreak and issue. Martijn Goedhart: In early 2025 in Europe, there were cases of bluetongue and that spread quite quickly across Western Europe. Spring started, early temperatures went up, and mosquitoes that spread the virus sting cows and then they get infected. It has an effect on calving. A lot of calves are not born in the right way, and also the cows, the output goes down, and it’s harder to get them pregnant. So, some cows, they first have to get over the bluetongue disease before they would start to calve. Some cows would calve late and that means that the milk also starts flowing late. Where you’d typically see a peak, in March, April, and then in eastern Europe, it’s a bit later, but now you’ve seen a similar peak because margins were good, but a longer [00:29:00] plateau at that level as well. Those cows get dried off later as well. So, are they gonna calve later again or is it like maybe some like refreshing of cows in the system, and the new ones will be set up according to the normal season? It’s a big question mark. We don’t know. Even the co-ops are struggling with that. Ted Jacoby III: So, you could have a flush that does not hit the peak it usually does, but it’s just longer. Martijn Goedhart: Yeah. If it’s the same as last year, that’s what’s gonna happen. If we somehow move back to a normal seasonal pattern, then you’ll see a higher peak than last year, but a bigger decline in the second half of the year. Josh White: If we’re talking about demand being okay and large amounts of milk in both Europe and the U.S. likely to continue, is there anywhere in the world that is suffering on their milk production? Do any of us have an idea of what’s going on with milk production in China? Martijn Goedhart: I think margins there are low. It’s been flat until now, the output, but it’s hard to get consistent numbers from China. But margins are still very low. So, that would not incentivize [00:30:00] growth. Ted Jacoby III: Milk production in China popped over a two year period, about five, six years ago. Then held steady for a couple of years, then it pulled back. Now, after that pullback, it’s flatlining again. Josh White: What we’re basically concluding from this is that we’re gonna have a lot of milk still, but, with the exception of some risk maybe on the cheese side and maybe in the butter situation in Europe, the rest of the products don’t seem to have concerning inventory levels as of right now. Ted Jacoby III: I would agree. I think there’s enough supply, but there seems to be surprisingly good demand, especially for protein. All right guys, we’re wrapping up here. Lightning round question. Do you think what’s happening in the nonfat market is a result of increased demand or less supply? Josh, you go first. Josh White: I wanna say both. We’re experiencing more demand across the entire curve that is both pulling more nonfat supply and is also pulling away skim solids from the dryer. Ted Jacoby III: Martijn? Martijn Goedhart: I agree with Josh. Some of it is fundamental SMD but a big part of it is demand waiting too long and needing to deliver. Ted Jacoby III: Henk? Henk-Jan Bouwman: yeah, I’m with you [00:31:00] guys. Ted Jacoby III: I do not want a chicken out like you and say both, so I’m trying to decide which one. I think it’s very subtle, but this is actually demand driven more than supply driven. Martijn Goedhart: Yeah. Ted Jacoby III: Yeah. All right guys. Thanks for joining us again. We really appreciate all the time that you guys spent tuning in and listening to us.  Keep milking those cows, and we’ll keep showing up and telling you what we’re seeing out there. Ted Jacoby III: We’ll be back in two weeks for a market update with the Jacoby team. Looking forward to seeing you then. All right guys. Hey, Martijn. Henk, thank you so much for joining us today. Really appreciate the conversation. Martijn Goedhart: Thanks guys. Huge pleasure. Henk-Jan Bouwman: Thank you very much. Martijn Goedhart: Cheers.
• 
  Mercados Lácteos en Movimiento: Leche Fluida, Proteínas y Volatilidad Global 25.02.2026 21min

  En este nuevo episodio de The Milk Check, Diego Carvallo conversa con Miguel Aragón y Yara Morales sobre un mercado lácteo marcado por una fuerte volatilidad y una demanda sólida de proteínas. A pesar de ser el mes del amor y la amistad, los mercados no han mostrado mucha “ternura”, con movimientos importantes en precios y disponibilidad. El equipo analiza el aumento en el consumo de MPC 70, MPC 80 y MPC 85, especialmente en México, donde cada vez más clientes están aceptando estas proteínas para aplicaciones nutricionales. También se comenta la escasez de renina/caseína renina, la fuerte presión alcista en los precios de proteínas lácteas y el comportamiento sorprendente de los WPC, cuyos valores han subido de forma significativa. Además, se revisa la volatilidad en quesos y mantequilla, la creciente aceptación de mantequilla estadounidense en México, Chile y Centroamérica, y por qué, aun con abundante leche en EE. UU., muchos mercados continúan bien soportados. Un episodio clave para entender hacia dónde se mueven los mercados de proteínas y lácteos, y qué esperar en las próximas semanas. ¿Tienes preguntas? Nos encantaría escucharlas. Envíalas aquí abajo y quizá las respondamos en el programa. Pregúntale a The Milk Check
• 
  Why Dairy Futures Seem Irrational 17.02.2026 24min

  Dairy futures have been anything but calm. In just three weeks, prices across Class III, Class IV, cheese, butter and nonfat have surged, then whipped back and forth enough to exhaust even full-time market watchers. In this episode of The Milk Check, Ted Jacoby and the T.C. Jacoby & Co. team break down why dairy futures can look irrational, even when the underlying fundamentals haven’t changed much. What’s driving the chaos (beyond fundamentals) Short squeezes 101: how a crowded short can turn into a domino effect Flow first, narrative second: why the buying often hits before the story shows up Realized vs. implied volatility: what the market did vs. what the options market is pricing in Why nonfat may be the center of the storm: the team debates whether this is a true regime change Why butter and cheese moved too: how spread relationships and algorithmic trading can drag correlated dairy contracts higher Spot market feedback loops: how NDPSR-linked spot markets can amplify futures moves (tail-wagging-the-dog dynamics). What usually happens next: why squeezes rarely park at the top Plus: stick around for a director’s cut featuring the unedited, behind-the-scenes debate the team usually leaves on the cutting room floor. Got questions? We’d love to hear them. Submit below, and we might answer it on the show. Ask The Milk Check Ted Jacoby III: [00:00:00] It has been wild and crazy every day for the last three weeks. Welcome to the Milk Check from T.C. Jacoby and Company, your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I’m Ted Jacoby. Let’s dive in. We’ve got a special treat for you this week. We’re gonna drop the director’s cut of this podcast where we include some of the conversations that usually get edited out: how we debate internally about some of these market dynamics. So, stay tuned after the end of the podcast and listen to the off-takes. My name is Ted Jacoby, CEO of T.C. Jacoby & Co., and joining me today is Jacob Menge, our Vice President of Risk Management and Trading Strategy, Josh White, our Vice President of Dairy Ingredients, and Joe Maixner, our Director of Sales. We are in week three of a very high level of volatility in the dairy markets. We’ve had a very interesting last few weeks. It’s February 9th, and since January 15th, our Class III March futures are up 18%. Our [00:01:00] March cheese futures are up over 15%. Butter futures are up over 26%. nonfat futures up 37% and Class IV milk futures up 36%. These markets have not gone up in a straight line. There’s been a massive amount of volatility, a lot of green, a lot of red, and then a lot of green, and then a lot of red again, enough to make all of us who talk these markets on a daily and an hourly basis to be flat out exhausted. The question becomes, what’s causing this level of volatility?  We are gonna talk a little bit about market psychology. Why can markets do what they’ve done in the last three weeks, and why our actual fundamental market analysis hasn’t really changed that much.  To quote the famous British economist, John Maynard Keynes, “Markets can remain irrational far longer than you and I can remain solvent.” And I’ll tell you that the last three weeks reminded me repeatedly of that phrase. It serves as a warning against over leveraging or trying to fight the tape, trading against trends, suggesting that just because you are right about a trend’s [00:02:00] long-term direction, it’s useless if you run out of capital. Ted Jacoby III: And I have a feeling that based on what we’ve been experiencing lately, there’s probably a few people out there that exactly that happened to. It has been wild and crazy every day for the last three weeks. Jake, why do markets do this? Jacob Menge: You threw out your little soundbite anecdotes. We will pull out some more of ’em during those podcasts, I’m sure, because those are all written by people that have been burned by short squeezes like we’re seeing, right? One that sticks out to me is: volatility is the tax you pay for liquidity and leverage, and that’s what futures markets are, right? They are a way for people to express their opinion on price action. Obviously, even a hedger is in some way expressing an opinion using futures or options. They’re highly liquid. You don’t even have to pay full price for ’em because you only gotta put up that margin upfront. And again, volatility is usually the tax that you pay for that. When you have this easy leverage, and everybody can get on one side of the boat you can’t have your cake and eat it, too. You can’t [00:03:00] have tight spreads, you can’t have the leverage and smooth prices all at the same time. And that can result in things like short squeezes. We were primed for one. You’re right, we had low volatility. We had a lot of people that were short the market because that was the prevailing narrative. As a result, all it took was one little spark to set some pretty dry kindling ablaze. That’s exactly what we saw, especially on the nonfat side. I’ll pull out my second anecdote. I’ve always heard: squeezes are flow events first, narrative events second. That’s exactly what was going on with nonfat. Meaning we get this massive bullish order flow coming in. The market goes up 30%+ in a few week period, and it’s only after that happens that all of a sudden we start having these conversations of, well, what was everybody missing in nonfat? I think the market probably was missing something on the nonfat side. But at the end of the day when you have volatility near lows, volume that was [00:04:00] fairly average, it makes sense that really the only way to go is gonna be up. If there’s any kind of news. And the news this time turns out there’s a whole lot less nonfat out there than people probably expected. And away we go. And it turns into this snowball where there’s the first people to see that and start wanting to buy, and the second they start wanting to buy, turns out there’s not a whole lot of sellers there, because everybody that wanted to sell already had sold. You get that first nice air pocket jump higher. That really is that first domino where if you’re a market maker, say, and you need to hedge your book, you’re trying to run a delta neutral trading book as a market maker, you might say, “Okay, well hey, I need to go get some long delta myself.” And you might go try to buy some options, to buy calls, to offset that. And then all of a sudden the market maker that is selling the calls want more for the calls than they wanted just a day ago. Ted Jacoby III: A day ago? Try an hour ago. Jacob Menge: Yeah, an hour ago. Truly. And so [00:05:00] that would be what we call implied volatility. Right. And I think that’s one important distinction here is we have volatility, what we call realized volatility, which is what the market actually did, like how crazy the market is, and then implied volatility, basically what the market is charging for options usually and implying what the market thinks the volatility will be in the future. And that’s where it gets really fun because even though we didn’t have a lot of realized volatility, if the market thinks it’s gonna become volatile and starts charging more for these options, it can almost be a self-fulfilling prophecy, right? Because now you have to pay more to buy that insurance policy, and you can see how that snowball really can grow fairly fast. We have one other really  fun part in dairy markets that I can’t help but mention, and that is that we also have spot markets. Those spot markets indirectly are linked to the futures prices because of our National Dairy Products Sales Report (NDPSR) system. And so we [00:06:00] can really wind up with the tail wagging the dog in our futures markets and in our spot markets where, say the spot markets were driving the ship on the way down. People had a lot of products, they’re selling them. Well, all of a sudden, if we start getting a little bit of a squeeze in our futures markets, now if you have product, you don’t wanna sell it on the exchange, you wanna just hold onto it and capture the carry in the futures curve. And so you’re not gonna sell. And so any bidder on the spot auction has to bid it higher. And guess what? Now the futures see the spot auction being bid up and they say, “Well, well, we are right to be panicking. We need to go higher.” And that’s just pouring gasoline on the fire. We’ve already got a raging inferno at this point, but that adds the final pour of gasoline. Ted Jacoby III: You remind me of one of my learning moments 20 some odd, almost 30 years ago, when I was watching these markets, as the futures markets were just becoming relevant to the dairy industry. And it was the realization that futures markets and spot markets are [00:07:00] two different markets with a different set of drivers of supply and demand. On the spot market, supply is, let’s talk about butter, is the supply of 80% bulk butter. Demand is the demand for that 80% bulk butter. The futures butter markets, it may settle to that NDPSR price of the bulk butter market, but the reality is the supply is the number of people who are willing to sell those futures, and the demand is the number of people that are willing to buy those futures. And so you can have people coming into the market that really don’t care at all about how much block butter are out there because they’re actually trying to hedge cream cheese or a chocolate shake or something completely different that has butter in it, but they need to own those futures, and that futures market can move quite a bit and has nothing to do with the actual supply and demand of the market it’s based on. Jacob Menge: Anecdote number three. I always have heard squeezes feel irrational because risk systems are mechanical. And I think that is true here, right? You have stops in place. A lot of [00:08:00] companies will have risk management policies that say, “Hey if VAR gets to a certain point, you have to get out of your position.” Or on the opposite side, you have to hedge your product if something has happened, or you have to hedge your buy price if the market hits a certain threshold. And so, that can really send the market in the short run to some areas that feel irrational, but again, it’s because the systems behind it are mechanical sometimes and not even human. Obviously, the human factor makes things even spicier. But once your mechanical stops have all been hit, and the party is coming to an end very, very rarely — I’m struggling to think of one short squeeze I’ve ever seen — that actually goes to the top and then just starts trading sideways. It is almost always an overshoot and a retracement back down to some level. And that is really where our different volatilities really matter because on that collapse back to reality, and reality can [00:09:00] be very different than where we started, just to be clear, if nonfat started at a $1.20, and we go way up to a $1.60, and then settle at a $1.40, we’re still 20¢ higher than where we started. So, don’t get me wrong, right? Short squeezes, there’s usually some fundamentals behind it, but it’s that blow off top that we might say feels super, super irrational. And again, we’ll have kind of this realized volatility going higher as we are going up and going down. But the more interesting thing in my opinion is that as we’re doing that retracement off of this super high blow off top, implied volatility tends to drift lower. That’s actually an important concept to really understand because as implied volatility is moving lower with the market moving lower, it gives the market breathing room, and that is the point where we can really find equilibrium and come out at maybe the price we should have been three months ago, but [00:10:00] shouldn’t have been last week during that crazy short covering rally. Josh White: Hey guys, what should we make of the fact that our least volatile product over the past, I mean, what decade, 20 years, is the most volatile right now? Or is it is nonfat technically the most volatile product? That’s it. Ted Jacoby III: It is. Josh White: Yep, Ted Jacoby III: it is. Josh White: What should we make of that? I mean, that to me should be the definition of a market cycle change, right? Do we believe that? Joe Maixner: If the market with historically the lowest amount of volatility now has the highest amount of volatility, does that mean that there is a structural change in the way that the market is operating? Jacob Menge: Yes. This might mean regime change for the nonfat market. But we’ve also had these other short squeezes in butter, in Class III. We’re still in a volatile period, but those could just be because we have algorithms keeping Class III and Class IV in check. We’re pondering the question: is there this regime change in nonfat from a low volatility commodity to a high volatility commodity? It’s probably too early to tell. My [00:11:00] guess would be yes, we’re not gonna go back to this boring state nonfat had been in, because it’s just a very evolving market with what we’re seeing on the protein beverage side, you name it: the market’s doing a really good job of taking a boring commodity and finding these new, exciting uses for it. And, and so it kind of passes the sniff test. What probably doesn’t pass the sniff test is what we’re seeing on the other commodities right now: butter and just the Class III products, frankly, I should say cheese in general. What we’re seeing right now with those is they’re following along with the nonfat rally. This really seems to me like nonfat is in the driver’s seat. And I think there’s pretty logical explanations for why we’re seeing cheese and butter do what they’re doing along with nonfat. We’ve got algorithms that trade spreads within our market, right? We do have a crushable commodity. We can take Class III, Class IV, and break it down into its components. As a result, [00:12:00] there’s some opinions on, say the Class III, Class IV spread. And so if we get this massive rally in nonfat, well then any algorithm that’s trading the Class IV crush is probably dragging butter along with it. And now we’ve got Class IV rallying, and there’s probably other algorithms and other people with opinions in the market on what that Class III, Class IV spread should be. And so, even if the absolute price is seeming outta whack there’s enough people with opinions on maybe spreads or calendar spreads or what have you, that are causing the reactions that we’re seeing. Ted Jacoby III: This is the scenario that I can imagine. Everybody has been short, pretty much all of the dairy markets for about six months now. Maybe it took other people longer than it took us to realize that there was gonna be too much milk out there all over the world. But by the time we got to the second week in January, I think everybody who wanted to be short this market already was. Then people started to realize that maybe they weren’t entirely right about the nonfat market. Kind of makes sense if you think [00:13:00] about what we’ve been talking about over the last six months, which is: too much butterfat, too much cheese, but protein’s still really in good demand. Guess what? Nonfat is 34% protein. So, all of a sudden people realized, shoot, maybe the nonfat market has a different dynamic to it and it might need to go up so they start buying it. Well, that causes the Class IV market to go up. And if you have insurance companies that are part of the DLP program that are short this Class IV market, then all of a sudden it’s going the other direction on ’em and they need to go figure out how to get some length in the Class IV market. But shoot, they can’t find any liquidity in the Class IV market. So, instead they’re gonna buy nonfat and they’re gonna buy butter. Now think about it. Now they’re gonna go buy butter. Everybody that wanted to be sure at the butter market is already sure at the butter market. There aren’t any sellers left in the butter market because everybody already did their selling. And so now they’re buying butter, driving the butter market up. And then the last few people who sold the butter market, those who were late to the party, all of a sudden are noticing their margin accounts go negative. Now they’ve gotta throw in the [00:14:00] cash. Maybe they don’t have the financial resources to fund a margin call. And so now they have to buy their futures back, and all of a sudden it becomes this domino, forcing more and more people, for one reason or another, to have to buy back their positions. The next thing you know, you’re up 26%, even though the reality is supply and demand to butterfat, not just in the U.S., but frankly, probably in the world, hasn’t changed one bit in the last three weeks, and that’s why we’re up 26% right now. Jacob Menge: Crowded trades don’t break because they’re wrong. They break because they’re crowded. Ted Jacoby III: I like that. I haven’t heard that one before. I like that . So what happens next? You talk about markets being in strong hands and weak hands. Moments like this force everybody who is a weak hand out of the market, and so the only people left with a position in the market are the ones in strong hands. Does the market go back, and I’m thinking butter, not necessarily nonfat. I think we were all in agreement that the nonfat market has probably had somewhat of a dynamic change. I don’t know if it’s a 36% change, but it’s had [00:15:00] somewhat of a change. But now the butter market, which really probably hasn’t had the same amount of change, the supply and demand for butterfat probably is the same thing it was four weeks ago. And I don’t think you’re gonna find many people out there who are arguing that butter needs to be at $2, like the current March futures say it should be. So what happens in the butter market next? Does it go back to where it was? How do these short squeezes usually play out? Jacob Menge: As an economist, I will say the markets are a perfect system and they will find the exact right price where buyers and sellers meet and everybody is happy. The reality is, short squeezes are really good for hitting the reset button and finding a new equilibrium. And sometimes that is right back to where they started. Sometimes that is closer to the top of the squeeze than the bottom. I think we’re still in that reset period. I don’t think we know where equilibrium is on all of our commodities. It’s gonna still take some time, right? [00:16:00] Because let’s just run with the theory of cheese is gonna go back to where we kinda started all this thing in the $1.40s on the futures. It’s gonna take time for sellers to step back in the market and chew through all this new buy-side liquidity. This buy-side liquidity can come from risk management plans that are in place. And so it just takes time to find that equilibrium. But that is in theory what the market’s going through. Ted Jacoby III: I wanted to have this kind of a conversation because the reality is this was one of those where there’s a lot of people out there right now, they’ve got about half the hair they used to have. Jacob Menge: I don’t think we made them feel any better. Ted Jacoby III: Unfortunately. I know. Stay tuned for the deleted scenes from this podcast.  And now the director’s cut. Josh White: Protein’s demand has absolutely changed. Ted Jacoby III: All along we were saying protein demand was strong. To me, this is more about butter than it is about nonfat. Why in the world [00:17:00] is butter up 30¢? Jacob Menge: I think we need to gut check every single model we have in any spreadsheet anywhere. Josh White: A hundred percent. Jacob Menge: Because it’s a new era. Ted Jacoby III: I would argue though that, I mean, we can talk all day long about whether or not our market analysis is right or wrong, but the reality is this was everybody’s market analysis. Josh White: That’s the point we’re making. Ted Jacoby III: I think the irony is, I think the short squeeze had absolutely nothing to do with underestimating how much protein was going to fluid. I think it started for a completely different reason, but once it started moving, we all started looking harder at our analysis. And said, “Man, maybe we’re missing something,” and then actually found it. Josh White: That’s the part that I’m struggling with is I’m actually thinking butter’s easier to rationalize in my mind than nonfat. I think nonfat is a bigger story right now than anything else because butter, what’s the elasticity of demand? And there’s a shift in it because we’re exporting again. Yeah, it’s making it hard for us to measure, but we definitely have been cheaper. And so for it [00:18:00] to be buoying around for price discovery, to try to find that new equilibrium with seasonality, with different products and all that, to me that’s actually easier for me to understand. Like it drops from a price that was significantly higher. Upper twos even pushing three and exceeding three for a short amount of time all the way down to a $1.50. If we don’t think there would be some demand response to that globally and that we would have some retracement or volatility for the opposite reasons that nonfat is probably going too high and gonna have to retrace lower. That to me, like I don’t think we should be super shocked that butter’s doing that. You know what I mean? Like trying to find its equilibrium. To me that’s easier to explain. Ted Jacoby III: Completely agree with everything you’re saying, but I would say this. What we’re arguing about butter is, it’s a vagueness of knowing the balance where the equilibrium price is. We’re just bouncing around trying to find it. I think that’s different from what happened in nonfat. I think with nonfat, the market, the physical market itself, literally [00:19:00] couldn’t get what it wanted. Joe, did we ever have a moment when we couldn’t get the butter we wanted? Before the run started, could you get all the butter you wanted? Joe Maixner: Not off exchange. Josh White: Not 80% fresh salted product. It was being hoarded, right? Joe Maixner: There’s multiple facets to this, right? Like yes, you cannot get any 80% fresh salt right now. But we’re also struggling on getting any old crop, 80% salt off of exchange right now because the old crop situation is much different than it was back when old crop was an actual market mover. Five years ago, all the old crop butter was only at a 12 month shelf life on domestic salted. Everyone’s gone to a 18 or 24 month shelf life. So the product’s still good off exchange for a lot longer than it used to be. So nobody’s out there needing to technically dump it at this point in time if you don’t have a sale for it, because you could still use it off exchange. For a brief period, yes, the salted market got tight, but it’s also because we had the carry in [00:20:00] the market that we had, right? We had the 20¢, 30¢ carry in the market. So, whether you had new crop, old crop, whatever, why would you sell it at a $1.35 in January when you could sell it for a $1.75 a $1.80 in March at that time? Now, we’ve come down, you know, now we’re at a $1.83 in March right now, but at one point we were at $2.00 on March futures with this rally. It’s simple economics. You can carry the products for 3¢ a month and you can make 14¢ to 25¢ depending on the month you wanna sell it in or you let it go for way too cheap. Ted Jacoby III: I hear you. But to me, that’s wholesaler math, that’s trader math. At the end user level, at the people who consume butter, has there been a fundamental shift in how much butter is being consumed? Joe Maixner: No, I don’t think so. Ted Jacoby III: Whereas I think when we’re talking about nonfat and especially the protein in nonfat, I think there has been. It actually manifested itself as a lower amount of supply in nonfat. But I think what’s happened is we were [00:21:00] taking that protein away from the nonfat dryer and using it somewhere else. Whereas with butter, I don’t think that’s happened. Joe Maixner: No, but at the same time, I think that there’s similarities between butter and nonfat, whereas people came into this year structurally short. They didn’t contract because they anticipated the supply to be there. Ted Jacoby III: And then everybody showed up, that’s essentially being short the market. Joe Maixner: Yeah. Ted Jacoby III: When I talk about how everybody who wanted to be short this market was already short this market, so there were no more sellers left to sell. So when somebody wanted to start buying, there was nobody to sell. Joe Maixner: I mean, ultimately you’re just explaining the classic short squeeze. Ted Jacoby III: Right? To me though, that is what we’re dealing with. That’s what we’ve been dealing with right now. That’s what the short squeeze is. It wasn’t just everybody was short this market. Then they were ready to start buying ’cause the market was low enough. Then they found there wasn’t anybody left to buy from ’cause everybody had already sold everything they wanted to sell. And that caused the short squeeze, without any real rationality of there being a fundamental change in demand or supply. It was all at the wholesale [00:22:00] level. Whereas with nonfat, I would argue that the market came to a realization that we were pulling protein away from the dryer to sell it into liquid UF, causing a fundamental shift in the actual supply and demand balance, whereas I don’t necessarily think that happened with butter. With butter, I think it was just the noise in the middle of people making choices about being long or short of market. I don’t, am I making any sense? Joe Maixner: I think you’re getting to the point where you’re talking in circles, if I’m being honest. Ted Jacoby III: To me there’s a difference between talking tactics and talking trading strategy and talking about a fundamental supply demand analysis. Josh White: I think it’ll make a compelling podcast for those that are wondering what’s going on. I genuinely mean that. Ted Jacoby III: We might actually want to have the 15 minute version of talking about what happened in market psychology. Then have an appendix to it capturing the discussion as to what is the real difference between what’s going on in butter and nonfat. Josh White: Or how do [00:23:00] these guys communicate when the makeup’s off? Joe Maixner: I think we leave, I think we leave it all in.
• 
  The Nonfat Short Squeeze 06.02.2026 24min

  Nonfat prices have moved sharply higher in recent weeks. But the rally isn’t being driven by a sudden surge in demand. It’s being driven by a breakdown in where milk is actually flowing. In this episode of The Milk Check, Ted Jacoby III and the Jacoby team unpack insights coming out of the IDFA Dairy Forum in Palm Springs and explain why nonfat prices have surged nearly 25 cents in just weeks, even as milk production remains strong. The issue isn’t price resistance. It’s availability. Milk that the market expected to move into dryers is instead being diverted into cheese plants, ultra-filtration, whey proteins and other higher-value protein streams. As a result, powder supply is far tighter than headline production numbers suggest. Layer in heavy short positioning, processing disruptions, and new offtake agreements, and the market begins to resemble a classic short squeeze. In this conversation, the team breaks down what’s actually driving NDFM and why higher prices haven’t unlocked new supply. We cover: How protein economics are pulling milk away from powder Why rising milk production hasn’t translated into greater availability Key structural differences between the U.S., Europe, and New Zealand Where the market may find its next equilibrium, and what could disrupt it If you’re relying on historical assumptions about nonfat availability, this episode explains why those assumptions may no longer hold. Listen to The Milk Check to understand what the evolving nonfat landscape means for pricing risk, exports and coverage decisions ahead. Available below or on Spotify, Apple Podcasts, Amazon Podcasts or YouTube. Got questions? We’d love to hear them. Submit below, and we might answer it on the show. Ask The Milk Check Jacob Menge: [00:00:00] There are just so many of these long-held assumptions, things that people who have been in the industry a while probably have, like, “Well, my gut tells me this.” Question your gut. Ted Jacoby III: Welcome to the Milk Check from T.C. Jacoby and Company, your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I’m Ted Jacoby. Let’s dive in. It is January 30th. We’ve all just got back from the Dairy Forum in Palm Springs, where it was a hell of a lot warmer than it is here in frigid St. Louis, Missouri. Joining me today is Diego Carvallo, the head of our international sales team and our head non -fat dry milk trader. We have Josh White, head of our dairy ingredients group, Jacob Menge, our VP of risk Management and Trading Strategy, and Mike Brown, VP of Jacoby Dairy Market Intelligence. Guys, welcome. What did we learn in Palm Springs? I think the biggest thing that came out of our visit and running into everybody at the Dairy Forum is that nonfat dry milk and skim milk powder really is tight. We have a short squeeze going on in the nonfat dry milk [00:01:00] market. The market is up. I think it’s 25 cents in the last three weeks. I’ll let Diego explain to everybody what’s really going on in the nonfat market right now. Diego? Diego Carvallo: Ted, that’s a very loaded question right now. Everybody’s scratching their heads. As of right now, today, Friday the 30th, the market just closed. The whole strip is limit up — 4 cents up. I think I hadn’t seen this in quite some time. IDFA was very interesting for a lot of people to discover why the spot market has been tight for this long and have good discussions on what the outlook looks like. Let’s start with the fundamentals. I think a few things are helping this market and supporting it and pushing it higher. The first one is what a lot of people are discussing, which is the amount of UF being produced in regions like the Midwest. We all know that many of the plants have installed new capacity to have UF sales, and those solids are in great demand [00:02:00] for cheese fortification right now. So that’s one of the reasons why the Midwest especially feeling this tight. Another reason is that the majority of the people who speculate with this market, and it goes from traders to manufacturers and even distributors, most of them have been short, expecting this market to move lower during the spring flush. I remember a few months ago, the speculation was that we were gonna break the $1. And, it seems like everybody got short, physical and in the screen, and that market, obviously, whenever we saw a bounce, everybody ran to cover their shorts, right? Another reason is that we saw a few interruptions in processing capacity, especially in California during the months of November. I think that also contributed to the tightness in the market without even getting into the conversation of new [00:03:00] offtake agreements that have taken up this year. So I think those are the main contributors to this market moving higher, and I think it’s something that is mainly affecting the U.S. The rest of the market is following through. I think this scenario is very different when you talk about European and New Zealand production. It’s even different when you see the U.S., the West Coast versus the rest of the country. Ted Jacoby III: Tell me about Europe. I know Europe started acting tight a little bit before the U.S., but what’s going on in Europe? Nonfat, dry milk and skim milk powder is probably our most global market when it comes to dairy. Diego Carvallo: So, Europe had a couple of large tenders that took place, I think that was beginning of January. So, the infamous O’Neill tender and a few similar tenders that usually move a lot of product. Those tenders took place, and I think it helped clear some of the excess product that was available in the market. But I think in Europe we had a similar situation where most of the traders, most [00:04:00] of the end users and manufacturers, everybody was expecting prices to move lower, right? Whenever we saw these tenders coming and the market slightly turned less bearish, I think everybody ran also to cover their shorts. But the situation in Europe has not been as bullish as it has in the U.S. The spread between the U.S. and Europe when it comes to skim has in fact widened as of right now. Europe is also feeling the support. Definitely. It’s in part driven by the U.S. rally. Ted Jacoby III: Well, that makes sense. I can tell you I had conversations with a few different manufacturers while I was at IDFA. And the best way I can sum up what the feeling was there’s a couple of dryers on the East Coast. Those dryers at this point are not expecting to ever run full this year, not even at the height of the flush, because there’s three new plants at various stages of development. There’s a new cheese plant in New York. There is a Fair Life milk plant in New York, and then ultimately a yogurt plant in New [00:05:00] York. All three of those plants are gonna need the milk. It’s gonna come at the expense of the powder plants in that area. You look at the Southwest in Texas again, you’ve got two new cheese plants that are still in the midst of ramping up. They are getting first dibs on the milk at the expense of the nonfat dry milk plants down there. So those plants are gonna get the milk that they expected. And there’s another nonfat plant that pretty much has turned a 100%, to Diego’s point that’s turned a 100% of their milk supply into skim UF that they’re supplying to various sources. And that plant is running the ultra filtration unit full. So, that plant isn’t drying anything. You got a couple of dryers in the Michigan area. They’re not running as full as usually, but it’s more of a domino effect there. I have a hunch as you get into the flush, those dryers may fill up. But you’ve got four other dryers, maybe five that aren’t. Now you go over to the west coast: California, those are drying. But California alone, as big as it is, is not enough to offset how much milk is not running into the dryers in the [00:06:00] rest of the country. And then you’ve got the Northwest, where there has been a lot of milk lost in the Northwest. And so that dryer isn’t running as full as probably previously expected. What happened was everybody just got together, finally started talking when they were all together in Palm Springs, and they realized when they did the math, even if we’re up 4.4% in milk production, we’re not drying more nonfat. Those skim solids are going elsewhere for various reasons. Diego Carvallo: The biggest question right now, Ted, is the lack of product in the Midwest and East Coast could balance out the lack of exports that we’re gonna have from this price rally. The numbers say that demand is approximately 60 million pounds. That number, it’s probably only 2% to 3% of U.S. nonfat production. So, it doesn’t seem like a huge number, but when you compare it to exports it is quite a volume. Ted Jacoby III: It really does add up. Yeah, no, I would agree with that. Jacob Menge: It sounds based on what Ted had just laid out and what you had said earlier, Diego, that this [00:07:00] isn’t necessarily a demand-driven rally. It’s really a lack-of-supply-driven rally. Ted Jacoby III: Yeah. A lack-of-supply-driven rally in an environment where everybody was expecting oversupply and kind of got caught surprised when they realized that even though there’s more milk, it didn’t fully translate to more powder. Jacob Menge: So, what changes it? Price? How long? What does end game here look like? Based on what I’m hearing, sounds to me like there’s almost not a price that is all of a sudden going to bring more supply out of the woodwork. So, is there a price that kills demand? People say, “Hey, we can’t make this number work anymore?” Ted Jacoby III: I think, actually, Diego just framed it a few minutes ago in the right way. This lost production that we were expecting, is it enough to make up for the fact that international demand for nonfat and skim milk powder isn’t actually that great? I think he’s hit the nail on the head. Let’s face it, skim milk powder, nonfat, dry milk is kind of the ultimate dairy commodity, which means it’s more price sensitive than others. And we’re gonna get to a point when we’re gonna find out where that [00:08:00] equilibrium point is between demand and supply. Josh White: There’s a few things that could tilt the scales a bit that I think we should just pay a little bit of attention to at the moment. You made a comment earlier that the production outta California isn’t enough to satisfy what we’re losing in terms of powder in the rest of the country. I wonder though, as we seasonally ramp up our milk volumes in the U.S., if we don’t satisfy that difference at a certain moment. I’m certainly not suggesting that that should make us all bearish. But I do think that there’s something worth noting there. Jake, you made a comment a moment ago that it doesn’t sound like there’s a price that slows it down. That same phenomenon is happening in Europe right now, and I think that Europe is also gonna seasonally increase their supply. They’ve got a lot of additional powder and there is a price out there that people substitute. There is a price out there at which you price out international demand. What we’ve gotta try to reconcile is all of this additional demand for skim solids in the U.S. is [00:09:00] that replacing our need to be an exporter of skim solids? I don’t have the numbers in front of me, but it feels like a reach to believe that we’re consuming enough to take away our need to compete internationally for skim demand. So that’s one thing that might just put a little bit of a seasonal ceiling on this thing as we move forward. The real question is, does that actually tilt us into a surplus situation again, or not? Big question that we should get our arms around. Additionally, I think that there is substitution within dairy. For the longest time, skim solids are very, very cheap. And as mentioned, the fortification into the cheese vat has been a pretty clear decision. When butterfat dropped to the price levels that it did, it makes a whole lot of sense to fortify. As these skim prices move a bit higher and dependent on our cheese price outlook going forward, does that math shift at all? I’ve heard arguments on both sides that the math does matter, and I’ve also heard arguments that the math really doesn’t matter. It’s all about [00:10:00] optimizing put through in the vat. So yeah, I think those are interesting topics for us to debate because those are the things that might tilt the market one way or the other. Ted Jacoby III: When it comes to skim solids versus butterfat in the vat, and let’s not forget, with the increase in solids in the milk, especially in butterfat, you’ve gotten the ratio of protein to fat outta whack, which is driving an increased need of skim solids into the cheese vat. The real math is: do you sell the cream or you divide the UF milk? Well, guess what? The UF milk is getting a lot more expensive right now. And so, you can make the case that you might actually force yourself to be comfortable selling the cream because it’s really a question of do you overpay for the skim solids or do you lose money on the butterfat if you sell the butterfat. At lower butter prices, for a couple of different reasons, you need a higher multiple on the cream in order to sell it. And one of the big ones is cost of freight as a percentage of the butterfat price has gone way up. You compare a $1.50 butter to $3 butter and on a percentage basis, your freight costs are twice as much [00:11:00] now. Which ultimately, when it comes to surplus cream, will drive down the multiple that you’ll receive for the cream. Josh White: You know, I don’t wanna shift gears, but I do wanna spend a moment just thinking about the milk production response and if our outlook shifted a little bit over the past month or two. ’cause going into the end of the year, it seemed like the U.S. and Europe were on a collision course, a game of chicken to decide who’s gonna be the first to drop price enough to see milk production slow down. Our global milk production, what is it up like 3.8% or something like that going into the end of the year on a solids basis, and no real sign of major change in the first half of the year, other than some signaling from European companies to lower their milk price and try to slow things down. Is this recent rally, whether it’s a short covering rally or whether it’s temporary, is this pushing out that response, whether it’s in Europe or the U.S., even further than we previously thought? Ted Jacoby III: I feel pretty comfortable saying no. And the reason I feel pretty [00:12:00] comfortable saying no, is for a couple of reasons. The biggest one is nonfat milk production is less than 15% of the milk supply of the U.S. And so, this rally in nonfat prices, it’s affecting less than 15% of the milk supply. Translated over a 100% of the milk supply, it’s not that big a number. I’m not sure it moves the dial a huge amount. Maybe I should back up a little bit because it’s now the higher of Class III and Class IV and Class I, and Class IV was trailing Class III by a dollar and now Class IV is ahead of Class III because of this rally. So yes, you’re starting to drive up prices there, too, so maybe it is helping the dairy farmer in a couple of places. While I agree that you’ve gotten a sympathy rally with cheese and butter, unlike nonfat, there’s more than enough butter and there’s more than enough cheese out there. And so we don’t actually see a true challenge to accessing supply with those two. So, while you may see increased futures levels at the moment, I’m not sure that’s going [00:13:00] to translate for a long enough period of time, the increased price levels for those products. Josh White: Just to play devil’s advocate, I think if you ask the market if fresh production of butter was readily available, the answer might be no. Ted Jacoby III: It’s either one of two things. There’s a lot of 82% being made for export. Or you’ve got 30¢ to 40¢ of carry in the futures market, and if I’m a butter manufacturer, and I’ve got any kind of working capital, I’m making 80%, I’m parking it in my own warehouse, I’m hedging it out to capture that extra 40¢, and I’m telling everybody I’m sold out. Well, guess what? That butterfat is still available. Once you get past the old crop, new crop March 1st date, that math changes, that’s only a month away. And I would even say you’re talking about the shortest month of the year, too. Josh White: Cheese has the same forward curve right now. Maybe not quite as dramatic, but a pretty good healthy contango going forward. What’s different about the cheese market? Ted Jacoby III: Cheese has a tendency to have carry in it when prices are low. The market is more used to this kind of carry in [00:14:00] cheese. Jacob Menge: The shelf life too. Ted, I mean Ted Jacoby III: that’s, that’s, well, that’s right. That’s the second one is cheese ages. And so six month old cheese is a different product than 30 day old cheese. With butter, there’s a reason why the CME rules for butter is up to 12 months after December 1st production. Whereas with cheese, it’s basically a 30 day market. And that has to do with how the product changes over time as it ages. Josh White: When we’re thinking about the cheese market, we’re talking about the U.S. milk production being up, year over year a lot. We throw a little salt on that because we recognize we’re comparing against bird flu impacted regions a year ago, but still lot more milk solids. Lot more butterfat out there. But at the same time, we’ve added plenty of Class III processing capacity, at least through the middle part of America to process quite a bit more milk. How is the whey component playing into this right now? Do we think these plants are gonna be highly motivated to fill up because of the return they’re getting for the whey [00:15:00] products, despite the cheese, situation you just mentioned, or are we really testing that desire to wanna fill up some of these plants as milk volumes pick up seasonally here in the state? Ted Jacoby III: So I can answer that question with the same answer two different ways. The first is: Please don’t forget that the Class III price ultimately insulates cheese manufacturers from major movements in price. If they’re having to sell all that cheese at a substantial discount to the market, they could be losing money making the cheese, but the reality is if they sell it anywhere close to the CME price, it’s still gonna be a net profit or at least a net break even for them on the cheese side. Meanwhile, if they have a whey protein dryer and they’re making WPC 80 to your WPC 90, Josh as you well know, as our primary whey trader, those are very, very profitable for cheese plants right now with the prices as high as they are. Josh White: Unprecedented. Mike Brown: Gives them a little room with a higher class IV price because of that return [00:16:00] from whey to pay a little more than the spread might normally indicate that they would. Just as a point of reference, if you look the most recent dairy production numbers we have products is for November, but Southwest was down 25% I think, in overall nonfat dry milk production. And they were 70% of the decrease over last year. Ted Jacoby III: Yep. Mike Brown: And you still have some plants filling up down there. Although, again, we’ll see what happens with this spread. But to the point we’ve all made earlier, it is a supply issue. And there’s no question those south central cheese plants in Kansas and Texas are a big part of the reason that there’s less milk going into powder. Ted Jacoby III: I had someone earlier today make a comment, and I never quite thought of it this way. He was actually talking about cheese, but I think the exact same thing goes for powder plants. Because the solids in the milk is up, they need less loads of milk to make the same amount of powder. And the bottleneck in the process a lot of times is not the milk receiving bay. So it literally means they have to take in less milk to get there. If you’re out in California, those bottlenecks are limiting how much milk they can [00:17:00] process. In the Southwest, they’re not. Josh White: Right. Ted Jacoby III: But demand for protein, I’ll frame it this way: We’re seeing huge increases in demand for whey proteins. We’re seeing increases in demand for milk proteins. We’re seeing increases in demand for UF milk, not just by cheese plants, but by ready to drink milk bottlers, as well, who really wanna sell that high protein milk. And that is what’s driving all of this. And it’s driving it away from the nonfat dryer, and it’s driving it towards cheese, which is a source of protein, whether it’s cheese or it’s the whey that comes off the cheese. It’s driving it towards those UF milk plants. It’s driving it towards milk protein concentrate plants. It’s really all about that huge increasing demand for protein that’s driving this. I don’t think it’s that hard to make the correlation that this big increase in the demand for dairy proteins across the dairy spectrum is what’s causing this powder market to be tight. Because it’s pulling milk away [00:18:00] from the nonfat dryer. Mike Brown: Yeah. And certainly, you have a fair amount of MPC capacity, certainly in New Mexico. If you can make a protein, you’re making a protein, I think, whether it’s milk or whey.Ted Jacoby III: I think that’s exactly right. So, Diego, where do we end? We were below a $1.20 three weeks ago. We’re at a $1.46 today. Are we gonna get to a $1.60? Diego Carvallo: Ted, I do know that the $1.40 is a strong psychological resistance and the futures are very close to it. I’m gonna monitor it. I don’t know how high we can go. At this point, it seems like a train, and I’m not gonna step in front of it. $1.50 is not impossible at this moment, but at the same time, I could tell you that we could have a strong correction also. So, very difficult to read right now. Ted Jacoby III: We just talked about a real nice rally going on in nonfat. The rally we think is because the demand for protein is pulling milk away from the nonfat dryer. Meanwhile, I think we have more than enough butter, though it may not be available yet, in terms of new crop, 80% butter sellable on the [00:19:00] CME. We think that we’re gonna have more than enough cheese, colored cheddar, which tends to be the product that drives price on the cheese side. So, even though we have had a rally in both of those products in futures, we’re not as strong of believers in the cheese market and the butter market as we are in the nonfat market right now. So, before we wrap up, we’re gonna do a quick lightning round question. We just came out of the Dairy Forum. We had many, many conversations with a lot of different people. What is the one thing happening in the dairy market right now that we think people are overlooking? Josh, I’m gonna start with you. Josh White: The reshaping of how milk trades across the country. I’m certainly not in the best position versus our milk team to address that, but the changes in where we can process milk, how we can process milk, and who’s demanding the milk is reshaping how things move. And I think that’s gonna test some of our experience and historical expectations for how a market responds to some of the signals we’re seeing now. I mean, let’s be real clear. Over the past 24 months, we’ve been surprised as a [00:20:00] dairy industry by two major things. It was not that long ago that you couldn’t get enough fat. The dairymen responded and it surprised the market, I think, to a point where now we’re expecting to be a fat exporter for a while. On the other side, if we go back, not even 60 days ago, the argument was will nonfat break a dollar? Or not. And today, we’re talking about it being a very firm market and citing a bunch of reasons why that happened. And the market, I believe, was surprised by that. So, if you’re a buyer out there, don’t assume that these markets can’t change and change fast. Definitely make sure you’re preparing yourselves for that because we just went through multiple years where there was almost no risk of getting access to nonfat supply, and we’re getting phone calls now where people need coverage right now and are having difficulties doing so. Ted Jacoby III: Thanks Josh. Mike, how about you? What’s something that nobody’s talking about right now that we probably should be paying attention to? Mike Brown: I think from the standpoint of the cheesemaker and that cost of those [00:21:00] protein solids is a three four spread flipping significantly. We’re $2 the other way again now. That cost of fortification has gone up a lot. Even with a $12 WPI market. That’s a big number to work with. And I think just in general, the growth in demand, whether it’s ultra filtered protein, fluid products, or the new cheese capacity we underestimated how that would hit the supply of nonfat dry milk, and we’re now living that. Ted Jacoby III: Excellent. Thanks Mike. Diego, how about you? Diego Carvallo: I have two things. One is the dollar weakness is something I haven’t heard a lot of people talking about and how that influences the prices for all commodities. And the second one is, I think a lot of people might be overlooking Mexican milk production. Ted Jacoby III: Up or down. Is it good or bad? Diego Carvallo: From informal reports, it could be strongly up. Ted Jacoby III: Okay. That would not be good for nonfat prices, would it? Diego Carvallo: Correct. Yep. Ted Jacoby III: Jake, how about you? Jacob Menge: I’ll go with just the upending of all kinds of long held assumptions. If you’ve got calculators you’ve been [00:22:00] using, dairy market calculators, between the milk price formula changes between dollar weakness changing between us flipping to be a fat exporter, throw it all out. There are just so many of these, probably long held assumptions, those kind of things that people that have been in the industry a while probably have like, “Well, my gut tells me this.” Question your gut. That’s my go-to train of thought moving forward. Ted Jacoby III: I think that’s a good one. And I will say, I think people are underestimating what this whole breeding to beef thing going on with the dairy farmer is doing to their decision-making process when it comes to killing cows. Everybody’s talking about how low the price is. Everybody’s wondering when this price will recover. And I keep asking myself, if every time a beef cow is born, you’re selling that cow for over a thousand dollars, why would you wanna get rid of that womb? ’cause that womb seems to be making you a lot of money. To all of our listeners out there, thank you so much for joining us this week, and we look forward to talking to you soon. Take care out there.
• 
  The Market is Lying to Us 16.01.2026 27min

  Milk production is up 4.5% — but somehow, milk is clearing. Something doesn’t add up. In this episode of The Milk Check, the team uncovers the shifts reshaping dairy economics in 2026. Ted Jacoby III leads a classic market roundtable with the Jacoby team to unpack what they’re seeing as dairy transitions out of the holiday demand season and into early-year reality. Despite 4.5% year-over-year milk production growth, milk is clearing in many regions. Cheese and butter markets are under pressure, but inventories aren’t yet burdensome. Protein markets remain tight. And nonfat dry milk is showing surprising strength. So what’s going on? In this episode, we cover: Why added processing capacity may be masking where supply is really long How cheese and butter are absorbing milk that would normally back up at the farm Why protein demand is tightening skim solids and whey markets Whether nonfat’s recent rally is real or a phantom And which dairy market narratives the team thinks are wrong right now If you’re trying to make sense of conflicting signals across milk, fat, protein and powder, this episode delivers the context behind the numbers. Listen now to The Milk Check episode 90: The Market is Lying to Us. Got questions? We’d love to hear them. Submit below, and we might answer it on the show. Ask The Milk Check Ted Jacoby III: [00:00:00] Am I just being a conspiracy theorist? Diego Carvallo: I would probably bet a little bit on that conspiracy theory. It could be. It could be possible, Ted. Who knows. Ted Jacoby III: Welcome to the Milk Check from TC Jacob and Company, your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I’m Ted Jacoby. Let’s dive in. We’re on the new side of the New Year. It is January 12th. we’re gonna have a classic market discussion today. Things have started to settle down from the holidays and I thought it would be a great idea just to share with everybody what we’re seeing in the markets as we’re transitioning from the high-demand season into the low-demand season. We have our usual suspects today. We have my brother Gus who manages our fluid group. We’ve got Josh White, head of our dairy ingredients group. We have Joe Maixner, head of all of our butter sales. Mike Brown, our Vice President of Market Intelligence, and myself. So, we’ll start with milk, Gus. What’s it look like right now? Gus Jacoby: It certainly isn’t tight, but it isn’t really long either. I think the November milk production was up [00:01:00] 4.5% and that typically would be fairly significant in areas where there isn’t a lot of additional processing capacity. One would think it would be very, very long with that kind of growth, but we’re not seeing that. Areas like the upper Midwest, Mideast, those areas are not as long as we thought they would be. I don’t want to act as if it’s tight. That’s not the case. Through the holidays, there was still plenty of milk that was around. But I think here as we climbed out of the New Year holiday and into mid-January, things have gotten fairly what we would say in balance. And that’s a little bit alarming considering that type of milk production growth. Ted Jacoby III: Why do you think that is? Is it just all the new capacity from all the new plants that have been built, or what else is going on? Gus Jacoby: Well, certainly in that western, upper Midwest and Southwest region, upstate New York as well, there’s been a lot of processing capacity that’s been added. So, those areas have been able to soak up that extra milk. I think milks travling a bit but I also think folks have found a little bit more efficient avenues to place the milk after dealing with some length over the past year [00:02:00] or so. But there’s a little bit of a question mark I have in the back of my mind as to how efficient we’ve been able to do so. Typically, when we have this kind of large growth, anything north of 4% is large, and large enough to be concerned about. But nonetheless, the processing capacity is significant. We don’t wanna discount that. But one can certainly wonder why in areas like the Mideast, where you haven’t really added a lot of production capacity here recently, why we aren’t seeing a bit more milk floating around. Ted Jacoby III: You think it’s just domino effect type things? Where, as milk is tighter in New York, so none of that milk is going into the southeast or into Appalachia, therefore it’s gotta be pulled from the Mideast? Gus Jacoby: Ted, that might be a part of it. I think domino effect is certainly going on here. There’s some areas of the country that don’t have enough milk because of that additional capacity we discussed. But having said all that, I think there’s some question marks out there right now as to why it isn’t a bit longer in certain parts of the country. Ted Jacoby III: What about some, I’ll call it non-traditional demand growth, and what I mean by that is things [00:03:00] like ESL or some of the protein drinks? It looks like there have been new brands showing up on the supermarket shelf lately. Gus Jacoby: If you’re alluding to areas like UF milk or high-protein fluid products there is certainly a lot of demand in that Class I, Class II segment of our industry. Add in the fact that you have a lot of demand for fortification solids for cheese plants, skim can seem a little bit tight right now, and there’s some logic behind that, but I don’t think there’s enough ultra filtration capacity right now to satisfy demand. So, if milk is going in that direction, there isn’t enough UF units out there, I think, to fill that void. And I wouldn’t say that’s the reason why we’re tightening up milk supplies by no means. In some parts of the world, yes, that might be the case, but that’s pretty small in the grand scheme of things. Ted Jacoby III: On the fluid side, is skim solids slash dairy protein tighter than the butterfat side? Gus Jacoby: Absolutely it is. Yes. I don’t think there’s any question about that. You’ve got two things driving [00:04:00] that. Too much butterfat requires cheese plants to gather more fortification solids, and the demand for protein right now is through the roof. You’re gonna have it hit from both sides and they’re hitting pretty strong. Ted Jacoby III: Could that extra skim solid slash dairy protein demand be what’s tightening up the milk market? Are we seeing it, for example, in lower cream multiples? Gus Jacoby: There still is plenty of cream around, to answer that question directly. I just don’t think there’s enough UF processing capacity at this moment in time to say that it’s tightening milk by any means. Ted Jacoby III: Could it be cheese plants taking the milk directly off the farm but spinning off a lot more cream? Gus Jacoby: I would say some of that is gonna go on. Yeah. ’cause there’s not enough fortification solids to be had, or at least not at the price the cheese plants are gonna be happy with. Cheese plants, even though they might prefer UF at times, they’ll take different types of skim solids and that certainly will tighten up that skim side of the market. That, combined with the fact that the protein sector is short, certainly you’re gonna have that element in our [00:05:00] market right now. I just think there’s enough milk out there, Ted, and not enough protein, isolation capacity of any sort to be the main reason as to why you’re not as long on milk as you think you should be. Ted Jacoby III: You know, I’ve had a theory going for a little while that all this extra capacity we’ve added, a lot of it is cheese capacity, and I feel like this time around, we’ve just transferred where we’re feeling the length. We’re not necessarily feeling the length in milk like we usually do. Instead, there’s enough processing capacity to get all that milk and to make cheese out of it. And therefore, we’re seeing the length in cheese, and we’re seeing the length in butter. And that’s why those two markets have been under so much pressure lately, whereas the milk market seems to be in balance. We’ve just moved down the supply chain a little bit where the length is manifesting. Does that make sense? Gus Jacoby: A little bit? Yeah. Mike Brown: It Does Make sense. Where you have new plants, they wanna be full. They’re cheese plants. They’re gonna try to fill those plants with milk to the extent they can market product, which is becoming a [00:06:00] concern as we see the CME cheese price continuing to drop. We’re also reaching a point when fat is very high, you can’t afford to fortify cheese vats because your skim solids price is high relative to fat. Right now everything’s kind of low, but powder relative to cheese, is as high as it’s been in quite a while. If you have revenue from waste stream, fortifying with nonfat or skim solids makes a whole lot of sense. But if you’re paying that full price for the casein portion of that skim, it gets closer again now too. It’s a little different situation than it’s been in a while. I don’t think Gus could be any more right about the need for more ultra filtered capacity. I’m just curious where it’s gonna show. Because the demand certainly seems to be there. Ted Jacoby III: If there’s one place where I think maybe we’re underestimating demand, it’s in that ESL protein space. And I agree with Gus, there’s probably not enough capacity to really manifest all of that resting demand or untapped demand, but I bet we’re maximizing that supply chain everywhere we can, especially given what we’re seeing in the whey protein [00:07:00] market right now. And it doesn’t show up in the data really clearly. You’re up four and a half percent in milk. Some of that is, we’re still measuring against weakness and we’re measuring against the bird flu outbreak that was happening a year ago. I just think there’s also some demand there possibly in that space that isn’t really showing up in the data in a way that makes it clear to everybody we’ve got some good demand in a couple of places. Having said that, I also think we’ve got more than enough cheese right now. We’ve got more than enough butter right now. But in both cases, and I’m gonna throw this at Joe I don’t think the inventories, at least what’s showing up in the cold storage data is telling us the inventories are burdensome yet. And that might just be when we are in the calendar, but it could just be we’re finding new places for demand. Joe, what are your thoughts? Joe Maixner: Yeah, inventories are definitely not burdensome right now. We’re coming off of pretty good draw down over the holiday season. Obviously, we’re really early into the inventory build period. But demand overall, coming back from [00:08:00] the holidays here, has been pretty strong out of the gate for the New Year. Everybody’s coming back to the office. They’re seeing these very depressed prices. And there’s been a lot of interest in both spot volume, building up some inventory on some spot buys, as well as some additional contract volume for the remainder of the year. So, going back to your comment on inventories, the one thing we always have to keep in mind with looking at cold storage is that number is all types of butter sitting in warehouse inventories. When it comes to pricing, the only thing that matters is 80% CME eligible bulk. We still have a fair amount of salted bulk, especially the older production, in people’s hands, and that has been showing up in the marketplace. A lot of that’s because there was not a lot of micro fixing for the holiday season. Cream was plentiful. People were making plenty of product outta fresh cream as opposed to reformulating that older butter into the retail pack. I think that there’s not a lot of fresh production being made right now [00:09:00] in the salted variety. We could see a nice little price pop here in the coming months once that older product becomes ineligible on the CME. Ted Jacoby III: It’ll be interesting to watch. It’s funny, I think there’s some interesting similarities, not with the old crop, new crop issue, but just some similarities on the cheese side. There’s an old saying about an anticipatory bull market where people start driving up the price ’cause they’re afraid of not having product tomorrow. This just feels like an anticipatory bear market where the inventory levels in cheese aren’t saying that we’ve got a massive amount of length and oversupply of cheese. But you can’t help but wonder if the reason the price is so low is because there is no one out there, both because they’re looking at their forecasted demand for their product and they’re looking at the forecasted milk supply, there’s just no one out there who has any worry about being able to get the cheese they need tomorrow. And so there’s no reason for them to go out there and buy the cheese today and tie up their capital when they’re pretty confident they’re gonna be able to get it tomorrow, maybe even at a lower price. And I get the feeling that there’s some similarities [00:10:00] in the butter market, too. But let’s switch over to the powder side. We’ve been talking about the strength in the protein market for a while, but lately we’ve been seeing some strength in the nonfat market. Diego, is that real strength is that long-term strength? Have we found a bottom in nonfat, what’s going on there? Diego Carvallo: Ted, it’s a very, very interesting question. It’s something everybody’s discussing and commenting about, right? The nonfat market feels like it’s way tighter, the spot market, than what most people were expecting. Right. And the funny thing is everybody has a different theory on what could be happening. We’re not sure what’s gonna happen in the coming months, but there’s definitely a few theories on why this market could be tight and why we’re seeing this kind of short covering rally that we saw in the past two weeks. There’s theories about more UF capacity in areas like the Midwest, which is creating a premium for that product in that region. There’s also theories of some plants in California [00:11:00] mainly being down during the months of November and October, which could have also created a shortage of product that needed to be delivered. Some point also to Mexico or the domestic market stepping in when prices reach the $1.10 or $1.15s and buying decent volumes. But the fact of the matter is, market is a little bit tighter, way tighter than what most anticipated at this period. At the same time, most people are expecting because of ample availability of milk in regions like California, that the market is gonna have to start building inventories because we are, I don’t know, 15 cents or 20 cents higher per pound than Europe. So we’re definitely not gonna be able to export a lot of product to Asia, to the Middle East, or to even Latin America at these prices. So, yeah, the market is tight, but the medium-term outlook is still that we’re gonna [00:12:00] see plenty of pressure. Ted Jacoby III: Any difference in price right now between skim milk powder and nonfat dry milk? Diego Carvallo: That differential between the two has shrank has been smaller because if you talk to most plants in California, everybody’s running nonfat at full capacity. Their plants are almost all of them at full capacity and nobody’s making skim this time of the year. It’s a throughput matter. They try to make as much nonfat as possible when they have plenty of milk. Ted Jacoby III: Interesting. You’d think if prices were going up in the U.S. but not going up in Europe, it would widen, but it’s actually shrinking. That’s wild. Diego Carvallo: Exactly. Yep. And with the U.S. making a lot of nonfat, all of that is gonna go into NDPSR, there should be pressure. At the same time, this week we have the ONIL tender, which most of the market is expecting a result and following it closely because if Europe doesn’t sell that tender, they’re gonna have more product and more pressure on their product. Ted Jacoby III: Makes sense. [00:13:00] Well, Europe’s had some surplus milk as well. Is it possible this market in the U.S. is popping because some of the European traders want it to pop so they can make sure that they clear the excess European product? Or am I just being a conspiracy theorist? Diego Carvallo: I would probably bet a little bit on that conspiracy theory. It could be. It could be possible, Ted. Who knows. Ted Jacoby III: Got it. All right. Sounds good. Josh, what’s going on in the whey market? We just keep talking about tight. Has anything changed? Josh White: No. It remains pretty tight. I think the whey protein demand seems strong. I will say coming into the year I’ve seen more product trade on the spot market, which is interesting. But the tale or the storyline is that that spot trade is still met with good demand and those prices are all still higher than the first quarter negotiated prices to many of the large users, meaning that there’s still good demand at these high prices, and the consumer hasn’t even seen these high prices yet. So it seems like it’s the same in Europe. First quarter is pretty much locked. Second quarter maybe there’s more vulnerability, but at the moment, I think that the [00:14:00] majority of the market would bet that we remain firm through the second quarter maybe even see some higher prices. I think what’s interesting if you look at the market is on the sweet whey powder side, you’ll have Europeans even comment that the whey market is a little bit firm, but they’re quite a bit lower than our price right now. And if you look at the forward futures prices, we have a classic short market. It’s inverted. It’s significantly inverted. And it’ll be curious to see if we really have that much additional sweet whey powder to either move the prices lower or we get enough demand pushback and reformulation to result in some extra product being available. But at the moment, across most of the whey complex it’s fairly firm, which I think tells the story. I mean, we went through the northern hemisphere’s lower milk production months, albeit we’re reporting really high year-over-year numbers, as you commented, compared to bird flu of a year ago in the West. People have had every incentive to place milk in any utilization other than butter and powder over the last few [00:15:00] months, and the market seems to be doing that. In addition to all of the other little comments, it feels like consumers knew that and really ran their supply chains pretty thin. And coming out of the holiday period, there is some short covering happening. Whether that’s just a derivative, speculative position short covering, physical short covering, it’s happening. In addition to that, when we look at the U.S., you can’t paint with a broad brush. The west seems to be running a lot of powder. The Midwest is not. And so that’s created a little bit of a tight situation here. So when you add the demand in Mexico for nonfat you add Midwestern pipeline filling, it’s enough that our spot market is carrying a really big premium to the rest of the world. We’ll see if that can continue as our daily milk production increases seasonally, both here and in Europe. I think that as that continues, as milk goes up, does that directly translate to butter and powder production going up? I would argue at least on some of these products, we know that the [00:16:00] WPI dryers are full. We know the WPC 80 dryers are full. I suspect that the MPC dryers are full and all of the fluid products going into those Class II products are probably full. So we’ll see if the market can handle the seasonal ramp up in production or not. And arguably, I think that’s what most of us are expecting. We’re expecting that we’ve still got plenty of milk. Then that’s gonna have some price pressure. But I also would comment that if we look back over the past few months, demand has been quite good. Global demand has been quite good. The question is, will it continue to be quite good or did we do a lot of buying in the late third quarter and early fourth quarter to refill the global pipeline? Things like Chinese New Year buying things like Ramadan buying and others, and are we gonna be met with an air pocket in demand as we start this year? Don’t know yet. The protein demand isn’t just in dry proteins or in UF for fortified milk. Mike Brown: It’s in yogurts. It’s in cottage cheese. At the same time, ice cream’s lackluster, sour cream is no better. And so that demand for [00:17:00] protein goes beyond just ingredients. On the whey side, boy, we’re gonna have to see a real shift in whey protein prices, wouldn’t we, Josh? We all know those dynamics can shift, but we’re a long ways from that. Other thing in California has got so much milk, they’re running everything full. If you look at anyone you talked the point made earlier, they can’t make SMP right now.They can’t, they are that full to the tilt. In fact, some of them are putting in production control programs again because they’ve got so much milk. Will milk move around, particularly if you can’t find a home for cheese no matter what the price is? Ted Jacoby III: The fact that California’s already running full and it’s the middle of January, which means we probably have at least a month and a half until they hit the peak of their flush. Mike Brown: Absolutely. Ted Jacoby III: That’s a Little bit concerning to me. Mike Brown: Yep. It, it should be to everyone and their spot prices show it. Cream’s been bad, and even the Midwest Class III spots are weak, but part of that’s because the cheese market’s weak. And that lag in Class III, which isn’t picked up in that weekly CME price until next month at the earliest. There’s signs that we’re seeing some shifts in the three four spread. We keep this up, [00:18:00] Ted, it’s gonna go away. Yeah. That may change where milk ends up. Ted Jacoby III: Yep. Diego Carvallo: I have a quick question, Ted. Where do you expect this extra milk in California to end up, because it seems it’s very early. I’m already hearing a lot of milk dumping in California. It seems like we’re at capacity in California. What’s the natural spill over for that milk? Ted Jacoby III: I’ve got two thoughts, but I wanna ask Gus a question first. Gus, if there’s one place where there might be extra UF capacity, would it be in California? Gus Jacoby: Perhaps, but probably not. Relative to demand. It’s limited pretty much all over the country. Ted Jacoby III: Okay. So what I’m gonna answer, in Diego’s question, first and foremost, we’ve lost a lot of milk in the Northwest. Yes. So I wouldn’t be surprised if it heads north on Interstate 10 and ends up in one of those plants in the state of Washington. That would be my first guess. My second guess would be the reason that I asked that question of Gus is they keep the butterfat in California and make butter out of it. Then they ship the UF milk to a cheese plant in the [00:19:00] southwest to extend the cheese yields there. If I were to guess it would happen in one of those two ways. Mike Brown: Diego, what you’re describing is exactly why they’ve put some production quotas back in California because they know it’s gonna get worse. And it makes perfect sense . To me, it’s gonna end up wherever the landed price is the best. On fat capacity, if California has the room to process fat, it’s gonna be in their best interest to process it. ’cause the people that buy surplus fat, outta California, that’s some of the lowest multiples in the country. Even when markets are tight. They’re not gonna wanna send that fat to Utah, Nebraska, or Washington State, or anywhere else if they can process it locally and store it. ’cause it’ll be just moving less water, it’s gonna be mm-hmm. To their benefit. And to Joe’s point. Butter markets are reasonably sound. I mean, they’re lower, but it doesn’t sound like we’re over big supply yet. But one thing we haven’t talked about much is that I think a lot of this price is gonna depend on if we keep exports strong. And that’s one of the big questions we all have. Are they gonna stay? I mean, certainly I think, Joe, listening to you talk, that’s helped a lot in [00:20:00] butter because we’re moving more than 82 overseas and we’re making more of it. On the cheese side. I’m hearing from some of the big cheddar guys that they’re still exporting cheese and relieved to do that. Prices are of course lower, but to me that’s really key. Particularly for products that aren’t as storable as powder. What are those trade markets gonna be? That may impact, where milk goes. Because even if cheese is a buck 30, if you sell it for 30 under, ’cause you have an oversupply, you’ve lost money. So that’s not something you’re gonna wanna do. Ted Jacoby III: All right. Well if I were to summarize really quickly what we’re seeing out there, I would say on the milk side, milk is clearing, which feels a little bit surprising given that we’re up 4.5%, but it’s probably due to all the extra capacity we have out there. However, on the butterfat side cream is long. Butter is long. And while we may get a new crop, old crop pop, the length probably will never fully go away. It just may be how the butterfat’s being processed and maybe we’ll have a temporary tightness in salted 80%. On the cheese side, we’re making a lot of cheese and we’re building inventories. [00:21:00] Mozzarella is feeling longer than cheddar because you can’t store mozzarella, whereas you can park cheddar in a warehouse if you want to, and that’s probably exactly what’s going on in the beginning of this year. Yes, we’ve got some exports but exports are not greater than they were at this time last year, though they may be at comparable levels, at least right now. But there seems to be a concern that that’s not sustainable like it was last year. On the nonfat side, that’s where we have some surprising tightness and we’re watching that market and we are watching it closely because there seems to be conflicting supply and demand indicators regarding where that tightness is coming from. And so our real big question is how sustainable this current tightness is. And on the whey market, whey market is strong. It’s been strong, it continues to be strong, and we haven’t really seen anything yet to change that narrative. And that in general probably sums up our dairy markets. I’m gonna ask everybody one lightning round question. What is one widely repeated dairy market narrative that you [00:22:00] think is wrong right now? Mike, I’m gonna start with you. Mike Brown: I think if there’s anything that is wrong or uncertain is how quick the response is gonna be to really, really low prices on milk supply. I still think we’re gonna take a while to back down and the folks that have really invested in and figured out the beef market are gonna be strong, but people that haven’t done that are gonna really get pummeled. So I think that’s it. How quick will we respond to the lower milk prices? How quick will market respond? It could be quicker than we think. Ted Jacoby III: You think it’ll be quicker. Mike Brown: I think it could be quicker. And I’m a good economist. I’m not gonna say it will, I’m gonna say it could, but yes, I think it could be a little quicker. Particularly with beef, with cull prices so high, there’s incentive to liquidate herds if you don’t wanna milk cows anymore right now. I’m not talking the 10,000 cow herds. I’m talking the smaller Midwest herds. Ted Jacoby III: You got it. Gus, what about you, one widely repeated dairy market narrative that you think is wrong? Gus Jacoby: I always have contrary perspectives on things. I don’t know what to tell you except, back to what I said originally. [00:23:00] Milk is just simply even with high growth production numbers, it’s not as long as some people might think in areas of the country where we haven’t added too much pricing capacity. All right. Sounds good. Diego, how about you? Diego Carvallo: I would say a lot of people are expecting farmers to be losing money at this level, and I think that’s wrong. Ted Jacoby III: They’re still making money. Diego Carvallo: Or maybe breaking even. Ted Jacoby III: All right. I like that one. Joe, how about you? Joe Maixner: I’m gonna buck Diego’s thoughts. I’m gonna go off a nonfat trend. I think that the nonfat market’s gonna continue to trend higher this year as opposed to fall back off. Ted Jacoby III: That’s a good one. That’s a good one. I will struggle with that one, but more power to you. Josh, how about you? Josh White: “This time’s different.” I don’t think this time’s any different than the prior times. I think it’s all perspective. Prices are gonna do what prices do to demand eventually. I realize that we have nuance to our markets, particularly with whey proteins, GLP-1 inspired demand, things like that. But I don’t know that I’m a subscriber to “this time’s different.” Ted Jacoby III: All right. Well, I’ll go ahead and venture mine out there, and I’m gonna have fun with it because I’m gonna [00:24:00] take the exact opposite side of the aisle from Mike and Gus, and I’m gonna say, I actually think this particular drop in prices is gonna last longer than the traditional six months. Usually you see it takes about six months for a market to bottom out and some of dairy farmer habits to change and see the market going back up. But I’m actually on the side of Diego. I think dairy farmers at this price are even still making money because they’re getting so much money from breeding to beef and in some cases from selling their manure. And as a result, their balance sheets will remain healthy. And they’re not gonna be under pressure to exit and sell their cows. I also believe that high beef prices have the inverse effect of what you would expect. And they don’t mean people will sell more cows. It actually means they’ll sell less because dairy farming’s a way of life. And so they’re gonna sell fewer cows to stay cash flow positive rather than more. And so I actually think that this one’s gonna take a lot longer than six months to adjust, but I think what’s really healthy is the fact that we have a diversity of opinions here, which means nobody really knows what’s gonna happen next. Alright guys, I thought [00:25:00] this was a great discussion. And, as it always is in the dairy industry, may we live in interesting times and this one’s not gonna be any different, is it? So thanks everybody for listening in. Great discussion today. Guys, thanks for joining us. Mike Brown: Thank you. Josh White: Thank you guys.
• 
  Valley Queen on casein vs. whey. Plus, where whey goes from here. 28.12.2025 27min

  In this episode of The Milk Check, Ted Jacoby III welcomes Lloyd Metzger and TJ Jacoby of Valley Queen Cheese Company for a deep dive into the science, functionality and future of dairy proteins. The conversation starts at the molecular level – the difference between casein and whey – and builds toward the real-world implications for product developers, processors and nutrition brands. We cover: Why casein is built to carry calcium (and whey isn’t) How heat and pH change protein behavior Fast versus slow digestion and why both matter The role of whey protein in muscle maintenance, aging and GLP-1 nutrition What pro cream really is and why its value may be underestimated Why cellular agriculture is more niche than threat If you work in dairy, food formulation or nutrition, this is a protein conversation worth digesting. Got questions? We’d love to hear them. Submit below, and we might answer it on the show. Ask The Milk Check TMC-Intro-final[00:00:00]Ted Jacoby III: Hi everybody, and thank you for joining us today for this very special recording of the Milk Check Podcast. Today, our topic is: what is the future of dairy proteins? And we have two very special guests. The first is Lloyd Metzger, VP of Quality and Technical Services for Valley Queen Cheese Company, and formerly Professor of Dairy Science at South Dakota State University. And the second, particularly special to me, is my son TJ Jacoby, Whey Technologist for Valley Queen. A South Dakota State graduate. Someone who has been interested in dairy proteins since his first biology class in high school. Guys, thank you for joining us today and welcome to The Milk Check. Lloyd Metzger: Glad to be here. TJ Jacoby: Good to be on, Dad. Ted Jacoby III: It’s December 18th, 2025. Milk production in the US is up 4%. Milk production in Europe is up something similar. Milk production in New Zealand is up. Milk production in Argentina is up. We are definitely in an [00:01:00] environment today where the supply of milk and dairy is overwhelming demand, at least for the moment. Cheese prices are near historical lows. Butter prices are near historical lows. Nonfat milk, skim milk powder prices are on the low end of the range. This market is a market that feels heavy, and I think most people out there would say, it almost feels like even though we’re at lows, we may actually go lower before we go higher. And yet, on the other hand, there are whey proteins, Josh, if I’m not mistaken, whey proteins just hit historical highs. Josh White: Maybe the highest prices we’ve ever seen for whey protein isolate and WPC 80. Ted Jacoby III: So, we have an environment where the demand on the protein side is extremely strong, and the trends on protein consumption are extremely strong and really feel like they’re gonna be around for quite some time. We’ve got baby boomers retiring and whether it’s because of GLP-1s or it’s just a general knowledge and understanding of what human nutritional needs are as people age, they know that they need more protein in their [00:02:00] diet. So, it begs the question: what is going on with dairy proteins and whey proteins and how is this going to evolve in such a unique market where demand is so strong for protein right now? And so, I’m gonna ask the question first. What’s the difference at a molecular level between whey proteins and milk proteins? Because when we’re in an environment like we are now, where you’ve got the demand really, really high, you also have a market that’s gonna start looking for alternatives, simply because prices are so high. What is the difference between milk proteins in general and whey protein specifically? Lloyd Metzger: It’s important to talk about from a functional perspective how the proteins are different. I’m sure we’ll get into the nutritional differences between those proteins as well. It’s important to understand what’s driving those differences in functional characteristics. And it’s really all about calcium. The casein system is designed to carry calcium. The whey protein system is not designed to carry calcium. That differentiates the two groups of [00:03:00] proteins and makes their properties very different. TJ Jacoby: I’ll explain it like this. Milk proteins, there’s two classes of proteins, right? There’s casein and then there’s whey. The casein is used to make cheese, and then the whey protein is what comes off. So, the whey protein is everything that is not used to make cheese. So, the reason why casein proteins works so well for cheese because those proteins like to fall together in these spheres, they like to stick to one another. They like to stick to one another ’cause they have certain groups that latch onto the calcium and then they bridge with phosphate. When they do, they have multiple proteins, different types of casein proteins that bridge together with phosphate and then based on their repulsion forces, they stick together. Calcium and phosphates really help it stick when we make cheese. The outside of that casein, micelle, that ball, when we make cheese, that outside is stripped off, it becomes hydrophobic, and that causes those spheres to stick together. That’s a huge functional property of casein. Whey [00:04:00] protein is the opposite. Whey protein is really hydrophillic. It’s very polar. So, they like to float around in solution and stay floating around in solution. And they don’t like casein. It likes to stay separate from casein. And so, when you make cheese, it readily is released into the whey stream because it likes to stick with the water. In the same way, those kind of stick together with these sulfur groups. But when you heat it up, they unfold. And when they unfold, now there’s certain reactions that can take place. So, those are the two major differences between casein and whey. Lloyd, what did I miss? Lloyd Metzger: I would try to simplify it a little bit. The difference between casein and whey protein is casein is what’s trapped when we make cheese. And whey protein is the soluble protein that’s left over in the water phase of cheese. Cheese making is a dehydration process. We concentrate the fat and protein that’s in milk, the casein version of protein in milk. But you gotta look at the properties of those two [00:05:00] systems and the groups of protein. So, the casein protein is actually really stable to heat, but it is not stable to pH. So, casein will always coagulate at low pH. So, you lower the pH of milk, you get a yogurt-like product. That’s all the casein that’s coming out of the system. Whey proteins don’t mind a low pH, and they’ll stay soluble at a wide range of pH. But now, when you get to temperature, the complete opposite happens. Casein can handle super high temperatures and be very stable. Whey proteins can not handle high temperature at all, they start to gel. I think it’s important to look at the two different groups. Now you get into the functional differences between those two and the very different properties you have between those. Lloyd Metzger: That’s why you get all these products that are very different from each other. Why cheese is so much different than whey protein. And then you have these dairy products that are a combination that have the two together. So like when we make yogurt, we end up with the two products together and get this property that’s partway in between the two proteins. Ted Jacoby III: [00:06:00] Based on what you’re describing, when we’re talking about milk proteins, MPC 80, for example, there’s a higher level of calcium, I take it in milk proteins than compared to whey proteins. Is that true? Lloyd Metzger: Absolutely, but let’s remind everybody: milk protein is both casein and whey protein together at the normal ratio that’s in milk. So, of the protein, 80% is casein, 20% is whey protein. So, when you say milk protein, you’re actually meaning 80% casein and 20% whey protein. Now, when we talk about cheese or casein, we’re basically a hundred percent casein and 0% whey protein. Now, when we talk about whey protein, we’re essentially a 100% whey protein, no casein except for one fragment of casein that actually gets solubilized, as TJ described, and now actually becomes part of whey protein. Something that a lot of people don’t understand is that about 15% of what we call whey protein is actually a piece of casein that gets lost in the whey and now gets [00:07:00] captured and harvested in the whey protein manufacture process. But again, it’s important to remember milk protein is a 80 / 20 combination of casein and whey protein together. So, when you’re talking about milk protein, you’re actually talking about whey protein and casein together. Ted Jacoby III: It’s funny, I just learned something never really quite had my head around, and that’s that 80 / 20 ratio, that 80% of all the protein in milk is actually either alpha or beta casein. Correct? Lloyd Metzger: There’s actually four different casein fractions that are involved that make up that 80% of the total protein. Ted Jacoby III: Okay. The casein molecule isn’t really any bigger than most of the whey protein molecules, but they tend to clump together in those micelles. And so, they act as one big humongous mass compared to whey proteins. Correct? TJ Jacoby: Whey proteins may be collected like in pairs like two at a time, but casein proteins, there’s hundreds, right? Lloyd, that will just clump together. Thousands. TJ Jacoby: So, these spheres are absolutely massive protein complexes, but in fact there are a lot of little individual [00:08:00] proteins that make it up and they’re all bridged together with calcium and phosphate. Lloyd Metzger: It’s a packaging system that was designed to package up calcium and phosphorus. So, the whole casein system was designed by nature as a delivery vehicle for calcium and phosphorus, because calcium is not soluble by itself. Calcium phosphate is essentially rock. It’s the material that makes up eggshells. Think, think about a ground up eggshell that calcium phosphate complex is not soluble and it will sink to the bottom of your container of milk if you didn’t have the protein complex to hold it in solution. The analogy I use is it’s basically a kidney stone. Think about how much fun milking a cow would be if all the calcium and phosphorus was in the form of a kidney stone as you’re trying to milk the cow. All that calcium and phosphorus can be solubilized with the casein system and put it into solution and then make it so you can deliver that in a nutritional product. Ted Jacoby III: That makes perfect sense. That’s really cool. I think you guys also already touched on the differences in solubility as you were [00:09:00] describing the different proteins. But there’s differences in digestibility as well. What’s the source of that difference? TJ Jacoby: I’ll take this one. Returning back to the infant stage, I feel like we could set this up in light of why nature created these proteins. Dairy is the fundamental human food for infants. You have babies that can live up to a year off of just their mother’s milk. All the proteins that are found in there, those building blocks to grow an infant, can be boiled down to those two protein streams: whey protein and casein protein. The purpose of the casein protein for the infants is it’s fast acting. It’ll go right into the gut, and the gut is full of enzymes, but also really, really low pH, so low that it actually causes even those whey proteins to unfold. And It allows the stomach enzymes to break it up super, super fast and be absorbed. It’s considered one of the most bioavailable proteins known to man. It’s designed for that, that’s why nature created whey protein. Well, whey protein itself is also very nutritious. It has one of the highest concentrations of [00:10:00] essential amino acid, and the second highest known to man of branch-chain amino acids. That means it doesn’t have to be processed through the liver before it can be used by the human body. If your body’s actively using and consuming protein whey protein’s really good because it can be absorbed into your system and go right to the muscles. 33% of your muscle is branched chain amino acid. That’s what’s getting broken down while you’re working out. And then in the elderly, that’s what’s getting broken down that’s causing some muscle degeneration. Whey protein can help fortify that very quickly. However, all protein that is consumed in the body could also easily be processed through the liver with time. And so, if you have time, that’s where the casein comes into play. The casein, when it hits that acidic environment in the gut, it immediately clumps together. It actually creates cheese curds in the gut. And the reason why that’s so important is it slows down digestion so that slowly over time, that will be absorbed into the system. So it’s not [00:11:00] like a rush of energy right after the baby eats and then it goes away right away. Instead, it slows it down. The casein itself also likes to trap other nutrients. The casein in the gut will house the fat and the vitamins and the nutrients so that it’s slowly absorbed over the course of the next few hours before the baby’s next feeding. Ted Jacoby III: As a result of those digestibility differences, what are the differences in the amino acid profiles between casein and whey proteins? The body’s gonna need to break down most of that casein in order to absorb it. When the body breaks down that casein, what are the differences in the way that it absorbs some of those amino acid profiles and short-chain protein strands from the casein versus what’s readily bioavailable from the whey proteins? TJ Jacoby: Casein does not have the same percentage of those essential amino acids. It’s not as high, but it’s designed to be slow absorbing. Protein itself, it almost doesn’t matter the amino acid structure, as long as your body has enough of those vitamins and nutrients to absorb and to restructure it to [00:12:00] a different protein within the liver — that’s what your body needs. Most of us, the protein doesn’t have to be fast-acting. It’s not like our muscles are actively breaking down all the time. It can slowly be absorbed, be processed through the liver, and then used for almost any other function as long as we have all the vitamins and minerals that we need. Lloyd Metzger: Part of this huge shift we’re seeing in demand for protein, especially whey protein, this started 25, 30 years ago with bodybuilders and wanting to build muscle mass. And the realization that TJ mentioned: branch-chain amino acids are very important if you wanna rapidly put muscle mass on. It is also very important if you’re elderly or if you have sarcopenia where you’re starting to lose muscle mass. In those nutritional states, it’s really important to have high-level branch-chain amino acids, so you can put muscle on. Or if you’re on a GLP-1 medication where you’re not gonna be able to eat very much, you need a very efficient source of protein to build muscle mass. So there’s certain nutritional states where it is important to have branch-chain amino acids [00:13:00] and be able to get those from a protein like whey protein that has ’em at a very high level. But for the normal person, it’s not really all that relevant. You could get the protein you need from any protein that provides all the essential amino acids. Now, most plant proteins don’t do that. We’re talking about the difference between casein and whey protein. Both of them are an order of magnitude higher in nutritional quality than plant proteins because they have all the essential amino acids. And to TJ’s point, as long as you have the essential amino acids, the body can produce the non-essential amino acids from those essentials. Essential ones are amino acids the body can’t produce. You have to have those in the food you’re consuming to be able to produce the components you need. Josh White: We’ve got listeners from the dairy side of the equation and listeners from the utilization side that are making different products. And some of those customers are currently faced with the reality that a part of the equation for their adoption of whey proteins as an ingredient has shifted. The competition level’s very [00:14:00] high. They’re having more difficulty accessing some of it. And the price has changed quite a bit. And I think that when you’re talking about these products going into CPG applications as a lower inclusion rate ingredient, but with a lot of label power, being able to put whey protein, for instance, on that label, there’s several of them out there that are struggling to determine what the functional differences might be between the various dairy proteins. And what I’m afraid that is happening is some of these companies that are on the lower end of the value scale and can’t afford to keep up with all of the great products that are demanding whey protein or even milk protein, are gonnastart exploring alternatives outside of our space. and I think that we don’t want that, right? And what we’re seeing is this popularity of whey protein is driving a lot of customers for R&D projects to be asking us specifically for whey protein. And so help us understand what applications might make sense to use one, the other, or both. Lloyd Metzger: It completely depends on the product that [00:15:00] you’re after and the characteristics of the product that you want. Something like a beverage can go two different directions. So, if you’re gonna retort the beverage and put a lot of heat on it, you can’t do that with most whey proteins. They’re gonna gel. The most comparable protein to whey protein would be an egg protein. And everybody understands what happens when you heat eggs; they turn into a gel. So, whey proteins will happily do that. If you have a high enough concentration and you expose them to enough heat. Casein actually helps to protect whey protein from that coagulation. A lot of these high-protein beverages, they’re oftentimes a combination of casein and whey protein. They might alter the ratio a little bit from the 80 / 20. They might bump the whey protein up a little bit and have a 60 / 40 casein to whey protein. And so you’ll see ranges in that ratio of casein to whey protein, depending on the characteristics of the product that you’re actually after. The heat is a big piece of that. And then we go to pH as a big piece of what changes the functionality of casein to whey protein and makes you [00:16:00] change those ratios. Yogurt is another great example. You’ve got these super, super high-protein yogurts and a lot of cases they fortified with quite a bit of whey protein to be able to have more protein and still have the characteristics that you want in that product. In the protein bars, there’s all kinds of whey proteins there. In that application, you actually don’t even solubilize the protein. There’s hardly any water in that bar. It’s really almost a dry protein that has a plasticizer with it, some carbohydrates that actually make that edible. You’re almost eating a dry product. There’s a lot of food chemistry that goes into which product category you’re putting it in. There’s not this straight fast rule that you use whey proteins in this, you use casein and that. It depends on what food chemistry you use and how you put the blend together and then what processing you couple with that to get the characteristic that you’re actually after. Josh White: Can we spend a minute or two talking about the acidified products? They’ve gained a lot of popularity. The market potential is quite large. Can we talk a bit about the [00:17:00] differences between the clear WPIs and our traditional products? Lloyd Metzger: I wanna clarify the question. Are you talking specifically about whey protein only in the clear whey protein beverages versus the normal whey protein beverages? Ted Jacoby III: Yes. Lloyd Metzger: We really start to get into the weeds because we’ve got different whey products. So we’ve got whey protein concentrate. And then that comes in various forms. WPC 34 or WPC 80 are the most common. The 80 and the 34 correspond to how much protein on a dry basis those two products have. And they have whey proteins in the normal ratio that would be in the starting whey. Then we get into a group of products called whey protein isolates. And whey protein isolates go through an additional manufacturing process that allows you to purify the protein further and they’ll have more than 90% protein on a dry basis. And you may start to alter the ratio of the various whey proteins that were present in the starting whey. Now, when [00:18:00] we get into the clear whey protein isolates, we really start to alter the ratio of the proteins that are in there. We’ll also start to change some of the mineral profile of the components that are in that product. And then when we use those isolates in a formulation, we gotta be careful about all the other ingredients ’cause they’re gonna have an impact on whether or not the product is actually clear and whether or not it can be stable to heat. So, you can actually make whey protein stable to heat by controlling the mineral profile and controlling some of the processing conditions. You’re now taking a category of dairy ingredient and you’re starting to use technology IP to be able to provide specific functional characteristics that aren’t normally part of that ingredient. All of these may be called the same thing, and the basic consumer has absolutely no idea what the differences between all these things are. And when they’re looking at a label, they’re probably looking for the word whey protein, and that’s all they’re looking for. Josh White: As we’ve seen the market tighten up, we’ve seen [00:19:00] more inquiries and exploration about the use of pro cream,also called WPPC, also called WPC 70, so many different names. Definitely, in our experience, there’s quite a uniqueness as we originate this product from different manufacturers. Perhaps we can talk a bit more about what this product is and how it differs from the other proteins in the complex. Lloyd Metzger: I talked about WPC 80. That’s just the normal whey protein that we concentrate out of whey. And then, I mentioned whey protein isolate. To convert WPC 80 to a whey protein isolate, you use a filtration step called microfiltration. And in that microfiltration step, you remove any protein that is interacting with fat and take that out of the system. So, if you start with a normal WPC 80 and we’re gonna change it into a WPI. We are gonna go through a microfiltration process and we’re gonna lose about 25% of the protein that was there and all of the fat that was there. And [00:20:00] we’re gonna make a WPI out of that. And that WPI is gonna have about 75% of the protein we started with. The protein that we harvest out of that is actually pro cream. pro cream is just a byproduct of converting WPC 80 into WPI, and it’s gonna have about 25% of the mass of the protein that you started with, and all of the fat that was in that starting WPC 80 material. So that’s why you see it called high-fat WPC 30, and if you dry that down, it’s about a WPC 60. You can take that and blend that with WPC 34. You can do all kinds of things with that ingredient. Manufacturers are always trying to find a home for that. ’cause you’ve got a very high value product that’s easy to market in WPI. Ted Jacoby III: Lloyd, that pro cream, our hunch is there’s a lot more value in that pro cream than the market currently has its head around. Lloyd Metzger: they’re the same proteins that are in WPI, they’re just interacting with a fat. Now the fat [00:21:00] is very unique in that there’s quite a bit of phospholipid fat in there. And so there’s a lot of literature and research being done on the potential health benefits for brain development of phospholipids for infants as well as elderly to help with memory retention and actually help to prevent some Alzheimer’s effects. So, you see some companies starting to market that component that they’ve isolated. I think there is a lot of potential value there. But we’re in the early stages of where that’s gonna go. And you have some companies leading the way that are producing very specialized pro cream type products that are being used in infant nutrition or elderly nutrition. TJ Jacoby: But Lloyd, how do those phospholipids affect the shelf life of pro cream? Lloyd Metzger: They don’t help. The phospholipids are unsaturated fats or partially unsaturated and unsaturated fats are very easy to oxidize, so if they’re not handled properly, you’ll get very stale and oxidized off flavors in the product. It’s something you gotta be careful of. Ted Jacoby III: Oxidized fats, [00:22:00] another way to call that. That’s rancid, right? Yes. Lloyd Metzger: On its way to rancid. Josh White: Another selling point that people will make of the benefits of pro cream are IgGs. Can you guys explain a bit more of what that is to the layman? Lloyd Metzger: So, immunoglobulin is a protein that’s also present in milk. It’s really high in colostrum. It’s at very low levels in milk about 72 hours after the cow was started milking, the levels drop way down, but there is still a low level there. Those immunoglobulins are a very large protein. So when you go through your WPI manufacturing process, they’re gonna partition with that fat and that protein portion that you’re capturing. So they’re gonna go in that pro cream. Looking at the composition of IgG in the different waste streams, you’ll find it’s elevated in that pro cream portion. Now I’d be a little concerned about what kind of shape that IgGs in because you’ve seen a lot of heat [00:23:00] and different manufacturing conditions through that process. So you’d really have to be careful about what kind of claims you’re making based on what kind of shape that IgGs in. Mm-hmm. TJ Jacoby: For an infant, those IgGs will go right into the bloodstream. It’s whole proteins, but for us, it actually has to break up the protein entirely before it can be absorbed into our system. So what kind of functional benefits does IgG bring for an adult? I’d be curious to see what that literature entails. Mike Brown (2): Over the last couple decades, DNA technology has been used more and more to produce valuable proteins, often for medical use like insulin. Are we gonna see a point with the cost benefit of that kind of technology we’ll reach where we can actually use that to produce these whey proteins rather than using a cow? Lloyd Metzger: There’s different levels of concern depending on the particular protein. An individual protein and an individual soluble protein like beta-lactoglobulin and alpha-lactalbumin that are in [00:24:00] whey, those have more potential to be produced in a fermentation type process. ’cause they’re an individual protein. You can over express it, you can get a lot of that produced. But when you get to the complexities of multiple proteins that are in whey, that’s when it really becomes uneconomical to do that from a fermentation standpoint. ’cause you’ve gotta produce all of those individually, try to put ’em together, then purify ’em. What people forget is how efficient the cow is. The cow is essentially a walking fermentation tank that feeds itself, controls its own temperature, cleans itself up. All you’ve gotta do is get the milk out of it. When you look at all the steps that go into the process and what it takes to produce it, it’s really hard to beat the efficiency of a cow. Ted Jacoby III: Lloyd, am I right in assuming that the threat of cellular agriculture to dairy would come in the development of specific protein chains and amino acids, but probably not in terms of the complete [00:25:00] protein profile that is delivered in milk proteins and whey proteins. Lloyd Metzger: Correct. And it would be the very high-end, expensive. So the lactoferrin. It would be your first one or some of the IgG, anything that is at low concentration and very high value. Because even if you did everything perfectly, you’re probably still talking $25 to $30 a pound in the manufacturer and isolation process. Well, we we’re really excited about $11 whey protein isolate. Right? You know, and that’s still half the price. Ted Jacoby III: Makes sense. Lloyd, TJ, this was an absolutely fantastic discussion. This was exactly what I wanted to get out of it. I can tell you I learned quite a bit today and I’m sure our listeners will too. Thank you so much for joining us. We really appreciate it. Lloyd Metzger: No problem. Happy to do it. TJ Jacoby: Truly special to be on today, Dad. I grew up listening to a lot of these podcasts, right? Now we’re here, now we’re on it together with you. So, no, it was truly special.[00:26:00]
• 
  One Bull in a Barn Full of Bears 11.12.2025 23min

  There’s milk everywhere: more milk in the U.S., Europe and New Zealand than a year ago, soft Class IV, and Class III futures that could slip into the $13s once you plug in today’s spot cheese and whey. With a long milk wave crashing over the dairy industry, will farmers start culling cows and leaving stalls empty? Inside the episode, the team churns through: Why strong balance sheets, paid-down debt and high cow values could delay a production pullback How lower feed costs shift the breakeven – but can’t fully offset falling milk checks Why Western and cheese-focused regions like the Pacific Northwest, California and Idaho may struggle first How WPC 80, WPI and clear whey proteins have become the lone bulls – and why capacity constraints limit the industry’s response Why there are limits to what customers can pay for whey, and where substitution is already happening It’s a barn full of bears on butter, cheese and fluid milk, but the protein complex is still flexing. The question is how long that can last? Tune in to The Milk Check episode 88: One bull in a barn full of bears to hear how our traders are navigating a market that’s bearish on volume but still bullish on protein. Got questions? We’d love to hear them. Submit below, and we might answer it on the show. Ask The Milk Check Ted Jacoby III: Welcome, everybody, to The Milk Check. It is December 5th. We’re gonna talk about markets today. And rather than boring you and having the same conversation we had three weeks ago, everything is still bearish. There’s milk everywhere. There’s milk all over the U.S. There’s milk all over Europe. There’s milk all over New Zealand. There’s a whole bunch more milk this year than last year. Things are long. It’s very likely things are gonna get longer before they get shorter. Today we have some of our usual suspects. My brother Gus has joined us today. We’ve got Josh White, we’ve got Joe Maixner, we’ve got Diego Carvallo. And, of course, myself. Looking forward to a great conversation. So, rather than discussing how bearish we can be on these markets, my question, and I’m gonna start by throwing this question at my brother, Gus, is Gus, how long do you think it’s gonna take for dairy farmers to start culling cows and for this milk [00:01:00] production to slow down? Gus Jacoby: I feel like milk price and farm economics are completely contingent on that and how bad those farm economics get with respect to the milk price. Class III is still relatively high. Obviously, Class IV is pretty poor right now. The way I see it, dairymen, at this moment in time, still have fairly strong balance sheets. So, the recent low prices haven’t affected ’em all that much. So, I don’t expect their behavior with respect to culling and whatnot to change. But I think in five, six months from now, assuming that the milk price is at or lower, and quite frankly, I think Class III probably does need to get a bit lower, you’ll start to see some of that behavior change. If I had to guess, either as early as early summer, but as late as maybe mid-fall, if farm economics don’t change, we’ll start to see dairymen begin to leave stalls open. I mean, they’re gonna cull a cow, collect that beef revenue that they can grab, and not necessarily buy the expensive heifer. Ted Jacoby III: You’re thinking it’s gonna take about six months for dairy farmers [00:02:00] to get to the point where they feel like they need to increase the amount of cows they’re selling in order to meet their cashflow needs? Gus Jacoby: That’s my best guess. And again, that can be either expedited or slowed down depending on where the milk price goes. Ted Jacoby III: Corn prices have really come down this year. Do you think the lower feed prices have lowered where that break even point is, or how low we need to go in milk price in order to really send those signals in a strong way? Gus Jacoby: Certainly, feed prices being lower are gonna be helpful to the farm economic model. This becomes a milk price discussion. If the cheese price continues to have that downward pressure and gets low enough, those feed prices won’t be low enough. It’s always related to their inputs. And certainly, cheap feed helps their cause to extend growth in the milk production model. Ted Jacoby III: Right now, on December 5th, the Class III prices for the first quarter are right around, let’s call it $15.50, but if you use today’s cheese price on the spot market at the CME in today’s whey price, you’re probably looking at something closer to $14, 14 and a quarter. [00:03:00] Is that low enough or do we need to go lower? Gus Jacoby: It’s low enough. But not low to expedite anything. Maybe that takes us into the late summer, and remember, it depends on where we’re talking here in the country. Milk production costs are different depending on where you exist in the country. And also payouts are a lot different in a lot of places, depending on where you exist in the country. So, some regions might struggle sooner than later. Ted Jacoby III: Which regions do you think are gonna struggle first? Gus Jacoby: The West, Pacific Northwest, I think California, areas like Idaho that are strongly cheese based. If you’re paying on a Class III price and it stabilizes, which I don’t anticipate here, then perhaps some of those regions might hold on longer. My guess is predicated on the forecast of Class III going a bit lower. Ted Jacoby III: I guess I’d have to agree with that ’cause I don’t think $14 a hundredweight is enough. Because we’re still in front of Christmas, and I think the market’s probably gonna get worse before it gets better. My hunch is we’re gonna see $13 milk this year. We’re gonna see it in Class IV, and we may be already [00:04:00] seeing it in Class IV as soon as December. I think we’re gonna see a 13 handle in Class III, probably most of the first quarter. Gus Jacoby: If you’ve got a Class III at 13, and Class IV holds as low as it is, which I would expect certainly in the first half of the year, and then you have your standard freight and other deducts in those milk checks, dairymen are now getting to an area that is very adverse. Ted Jacoby III: Even though we’re talking about really low prices, I think there’s a lot of dairy farmers out there that are in a pretty healthy place. Gus Jacoby: I would agree. Ted Jacoby III: They’re healthy in two ways. One, I think that many of them have been able to take the last two years and really pay down their debt. And so, they’re in a really good spot financially, just on the balance sheet alone. But the second thing is those cows, they’re worth twice what they were worth three years ago. And so, not only have they paid down their debt, but if they need to borrow more, they’ve got more collateral to borrow against because those cows are usually the collateral for the banks when the banks lend dairy farmers money. It’s [00:05:00] usually the cows and the land. My hunch is that this may go on longer than we expect because of how healthy dairy farmers are financially today. Not saying they’ll be healthy in four or five months, but they’re healthy today. And because of how much bankers are probably willing to lend them based on those balance sheets. Gus Jacoby: I agree that the balance sheets are strong at the moment, even after a couple tough months. But I would also add, that that can change fairly quickly if the milk price gets low enough. And it’s certainly a ratio of farm economics over a certain period of time and milk price. If it gets low enough and makes those farm economics adverse enough, it can expedite the issue, which is a plausible scenario right now. Ted Jacoby III: Mm-hmm. I would agree with that. I think the hardest thing, especially when you have a falling market like we do right now, is to try and figure out exactly where the bottom is. About a month ago, the bottom was about a $1.40. Well, guess what? Cheese price is already below a $1.40 Now, we’re hearing it’s gonna be [00:06:00] somewhere in the $1.20s. What I’m scared is we’re gonna get to the $1.20s, and somebody’s gonna start talking about maybe we need to go into the teens. I don’t know if we’re gonna go that low, but we’re definitely in that scenario right now, where you have a market that’s falling and nobody has a really good feel for where that bottom is. Gus Jacoby: I agree. Cheese and butter right now, their outlook over the next six to eight months does not look good. Ted Jacoby III: Yeah. You mentioned butter. Joe, I’ll ask you: we’re below a $1.50 in butter. Butter feels like maybe it’s caught a temporary floor. Is this a temporary floor or could we stabilize here for the next six months? Joe Maixner: I think we’ve hit a temporary floor, but I don’t think it’s the lowest we’ll see over the next 90 days. I think that cream seems to be in balance, even after Thanksgiving, and I think it’s kept a nice spot in the market where people are willing to buy, those that hadn’t already put contracts on for next year are seeing the 2026 numbers and they’re looking at that against their budgets and blocking volume up for next year. A [00:07:00] lot of first half volume’s already been booked. We’re just seeing more activity. We’ve hit that level of support. Ted Jacoby III: Joe, you mentioned cream. Gus, I’m gonna go back to you. We had some really ugly cream multiples the first half of last year. Have we increased churn capacity, and do we expect those multiples to be just as bad this year or have we increased churn capacity enough so that maybe they won’t quite get so bad? Gus Jacoby: We have increased churn capacity, certainly. I don’t know if it’s enough. Some dairymen around the country are feeding their rations a bit different and getting a little bit less butterfat out of the milk. I don’t think that’s enough, yet, to make too much change. I will anticipate having some very low multiples through the holidays and the spring flush. Ted Jacoby III: Okay. Diego, I’m gonna switch gears and come to you. We just talked about U.S. milk production. Gus thinks it’ll take about six months to turn. I hate to be really pessimistic, but my gut, and I just can’t shake this gut, is it’s gonna take longer than usual this time around. And we may see it go well past nine months before we see a real turn. [00:08:00] We may see the number get better simply because we’re measuring against strength, but that doesn’t mean we actually see a change in trend. What about Europe and some of the other milking regions in the world, is it gonna take that long us to see some changes in milk production in those regions? Diego Carvallo: If you just go to the fundamentals and you analyze that the European farmer usually has a smaller scale, and that means that their costs tend to be a little bit on the higher end. They do not have access to capital as there is in the U.S. There’s more restrictions when it comes to environmental, and overall I would say they have more headwinds than the U.S. So, if you add to all of those headwinds, the price headwind, the reaction on milk production to lower prices should be faster than in the U.S. The same applies to South America. But we’ve talked a lot about Chinese production, we know that in that country, there are way more things to take into account. Ted Jacoby III: [00:09:00] So, we’ve been talking a lot about the supply side today. We’re just overwhelming supply on the butter side; we’re overwhelming demand to a lesser extent, but still on the cheese side. Josh, protein still tends to be the shining star. But are we getting to a point where we’re starting to get some pushback on protein prices? And is that going to continue to be the lone bull in an overall bearish dairy market, or do we need to be concerned there too? Josh White: I don’t think we’re getting pushback at the prices quite yet. Does that mean I think that these prices are palatable over the long term? I’m unsure. But what we are seeing right now is lack of availability and no quick ability by the European market or the U.S. market to scale production to meet the demand, which means that ultimately, the demand for WPC 80 and WPI and then some of the more value-added proteins, particularly in the whey complex, like the clear WPIs, the acidified products and others, the demand is outpacing our ability to supply it. What that’s [00:10:00] doing is forcing utilization segments or customers that can’t compete in terms of price for that available supply to look to alternatives. We’re starting to see more and more of that. As a commodity trader, we expect that to happen quicker than it does. So, already in early 2025, we were looking towards MPCs, casein-related products and others to pick up some of that demand because they’re much lower value. And I don’t think that the average customer in the market that’s using whey proteins fully recognize the functional differences between whey proteins and milk proteins. And they certainly don’t realize that milk protein concentrate has whey protein in it. Generally speaking, the average consumer doesn’t know the difference in these products. That’s not a fault of theirs. Particularly going into CPG applications and further processing, this is an ingredient. An ingredient that has a lot of label recognition and popularity right now for all the reasons we’ve talked about in prior podcasts: GLP-1 driven demand, [00:11:00] health and wellness movements globally, a lot of other reasons. Is that an early indication that enough time has now passed that the relative value of whey protein above the competing, but still quite valuable proteins in the dairy complex, are gonna result in substitution both substitution within the dairy category to whey protein to milk protein concentrates to micellar casein to WPC 70, also known as WPPC, whey protein phospholipid concentrate (WPPC) ProCream. There’s a lot of different names for these products. That’s likely to happen. But it also, unfortunately, might result in a lot of categories pushing to non-dairy proteins. There’s a lot of information out there, things put on by ADPI and others talking about the protein power of dairy and how digestible it is. How high quality it is for your conversion rate, why it’s such a popular thing. But if you can’t get supply, you’re forced to look to alternatives. And so, we’re starting to see some of that [00:12:00] happen. So, a couple things that I’ve heard anecdotally in the market over the past few weeks in particular, but it’s been happening over the last few months are: get us samples of milk protein concentrate. One of our customers is suspending a certain SKU on the shelf because they can’t get the supply. This price simply won’t work for our application. So, we won’t buy this product at above this price. So, we are triggering some thresholds. And triggering thresholds is gonna have some type of balancing result in the industry. Whether that’s enough to support the milk protein side of the equation, I don’t know. We have a limit to the ability to respond to this demand. You have to order equipment, you have to get the bank lending, you’ve gotta get the design. It takes a long time to increase capacity. That’s all gonna come into play and impact this market and the balance of this market in 2026. Now, if you’re asking me, is my gut that we hold these high prices or even higher prices without some reversal in the price [00:13:00] action for whey proteins in 2026? I’m not ready to say that it’s just here or higher in 26, but is it here or higher in the first quarter? Absolutely. Is it here higher in the second quarter, probably. Is it here or higher after that? I become a little bit skeptical. And to be clear, that’s not because the demand isn’t there right now. The demand feels like it’s there. I just don’t know how the market balances it out without pushing the price just too high in the short term for the market to digest it and pass it through. I also think that when you’re talking about the dairymen and you’re talking about the cheese makers, there is two different classes here. There is the class of those that make whey proteins and the class of those that do not. That has a material impact on profitability throughout the supply chain. Additionally, we’ve got a lot of milk in the U.S. We’ve got a lot of milk in the world right now, and the milk in the Northern hemisphere altogether is only gonna increase from here through the first half of [00:14:00] the year. That milk is gonna need to be processed. The incremental milk production will result in incremental whey protein availability, which means that those whey solids from cheese processors they have to find a market. If you can’t make the valuable product of WPC 80 and WPI, you have to explore the other alternatives, which are simply not experiencing the robust demand of those two categories. Sweet whey powder, whey protein concentrate 34% (WPC 34) and some of these other products, they have a limit to what people are willing to pay. History tells us, at least for sweet whey powder, we’re testing those limits. Ted Jacoby III: For sweet whey powder, we are, the question is, is this happening for whey protein? And that’s a harder one to answer. Josh White: Absolutely. Ted Jacoby III: I did some back of the envelope math. As a country, we produce 8% to 9% more milk in May on a daily basis than we do in November. If half of that milk goes into cheese, we’ll produce 8% more cheese and 8% perhaps more whey protein. The solids change, too. So, maybe it’s not a full [00:15:00] 8%, but is 8% enough to tip the scale on whey protein demand? And I don’t know, given the demand complex for whey, I think for cheese it’s gonna feel very burdensome. I think for butter, it would probably feel pretty burdensome. The butter market we’re kind of used to it because of the way the demand curve looks, but I just don’t know when it comes to whey, if that’s enough to put some pressure on this market and bring those prices down. Josh White: Well, it depends on what you’re talking about because you could argue that the WPC and WPI facilities are bringing in outside whey solids. Mm-hmm. Mm-hmm. As their own milk and their own whey generation increases seasonally, that’s gonna push whey solids back to somebody else. So, all 8% in your hypothesis there, I doubt contributes to an 8% increase in whey protein production.  Because the available capacity isn’t there? Josh White: Correct. Now, is there production efficiencies that are still gonna be gained? Are there those out there that are expanding a bit [00:16:00] that we’re unaware of? Are there orders for new equipment in the system that might be closer to realization than we think? All possible. And we can’t ignore Europe. I don’t feel like I can adequately represent what the expansion model looks like in Europe right now for whey proteins. What I can say is that at least for the U.S. and Europe, our internal demand is currently absorbing a greater percentage of our production than ever before, and that’s leaving the rest of the world that was buying product from those two markets, having to search for that protein elsewhere. Ted Jacoby III: Mm-hmm. Josh White: And, this is being a bit over generic, but the rest of the world likely will be more willing to substitute than the U.S. or the European consumer to other products. Ted Jacoby III: I would agree with that. Everybody in our office is just leaning really bearish, just about everybody we talk to seems to be leaning really bearish. Josh White: Outside of Black Swan events: major trade disruptions, major production impacts that we can’t predict. If you’ve [00:17:00] been in the dairy industry long enough, you know to never bet against the dairymen and their ability to make milk. But it’s gotta be on the radar that the competitive dollars for those animals I don’t think has ever been as lucrative as it is right now. And those animals that they’re currently milking are older then typically they want them to be. So, if we shift this cycle quickly enough and violently enough, and that’s price, at what moment do we get surprised at what that residual response is? How many pent up animals find their way to slaughter? How quickly that could happen. And I think generally speaking, most of us would bet that the calf inside the dairy cow right now is worth enough to wait. And so, we’ve gotta get through the first half of the Northern Hemisphere season before we see much of an animal response. Ted Jacoby III: I think that’s a fair comment. Dairy farmers, especially the big financially astute ones, there’s a math equation. It’s like, this is my revenue [00:18:00] from milk. This is my maybe revenue from biofuels or wherever else. They have revenue streams from a cow that’s giving milk every day. This is the cost to maintain that cow. The variable cost feed, for example, being the big one. Well, when you’re getting $20, a hundredweight from your milk versus $13, a hundredweight for your milk.  That equation has changed quite a bit, whereas the exit price, what you’re gonna get if you sell the cow hasn’t changed at all, which means your math equation, the exit possibility has definitely gone up. It’s more profitable to sell this cow than it used to be. Josh White: History tells us that the exits of the older dairymen and the smaller dairies doesn’t really change based on economic conditions, it’s relatively stable. Maybe there’s some risk that we have some pent up exits and some risk that it’s never been a better time to retire. Mm-hmm. And you get some smaller dairies that decide to exit. That doesn’t move the needle. Ted Jacoby III:  I would suspect. You’re right. We’ll see. Josh White: One [00:19:00] quick remark that’s important is the outlook on demand. It seems like the market is very, very bearish because supply is outpacing demand globally and it’s in every major milk shed. But demand by import regions has been pretty good. Mm-hmm. They’ve been buying year over year, more dairy products. At the same time, I don’t believe there’s any region in the world that’s currently sitting on cumbersome overall dairy stocks, whether that’s from the import regions or the production regions. Everyone seems to be quite aware that you gotta stay in front of this. I don’t know how to interpret that. On one hand, you could say that based on some of the economic outlooks, globally, we shouldn’t be expecting things to get better. We should be expecting them to get at best the same or possibly even worse. On the other side of that equation is import dairy consumption and demand is growing and continues to grow, so it might be a painful period, but the long-term [00:20:00] outlook remains pretty good, and we just overreacted to some of the demand signals that we have. Credit to the dairymen in the world, being able to respond to signals that we needed more fat, not even a year ago. That whey protein demand’s good. I mean, the market has responded, but overall we’re not talking about an oversupply situation because demand’s bad. If you go granularly, like U.S. cheese consumption, doesn’t look real great right now. The outlook for overall economic health, I’m not an expert in that area, but I’m not seeing a lot of people talking about a rosy 12 to 24 months there. So, yeah, I think generally speaking, it’s easy to be bearish, but maybe that’s one thing to pay attention. Ted Jacoby III: You mentioned demand. I happened to be involved in a conversation yesterday with an equities trader and his comment about stock valuations, equities, valuations, which was really a demand comment, was, I’m just waiting to see what Christmas sales do. I think there’s a lot of people out there right now that are trying to get a feel for what’s [00:21:00] the long-term demand or the 2026 demand perspective, and I think a lot of them are gonna judge what it really is based on how this holiday season plays out. All right guys. Hey, thanks for a great conversation. I apologize to all the dairy farmers out there that I couldn’t give you any better news, but hang in there that good news will come eventually.  That’s right.
• 
  When Will Dairy Prices Turn Around: GLP-1 and Oversupply 18.11.2025 26min

  Milk production is up 4.2% year over year, components are climbing and prices are falling. As holiday orders wrap up and we head into the long winter, The Milk Check team digs into whether dairy markets have already found a floor, or if there’s still another leg down to go. With milk products everywhere (except for whey), the Jacoby team shares where the market is and where we’re going. They churn through: Butter at $1.50 and what heavy cream and higher components mean after the holidays Why cheese feels like a calm before the storm, and how far Class III could grind lower Nonfat and skim: long milk, growing inventories and buyers shopping the cheapest origin Why whey proteins are the outlier, with tight supply, strong demand and GLP-1 tailwinds Global milk growth, clustered demand (Ramadan, Chinese New Year, Super Bowl) and who blinks first between the U.S. and Europe In this episode of The Milk Check, host Ted Jacoby III is joined by Joe Maixner, Jacob Menge, Diego Carvallo, Josh White and Mike Brown for a rapid-fire market session on butter, cheese, nonfat and proteins. Listen now for The Milk Check’s latest market read on butter, cheese, nonfat and whey. Got questions? We’d love to hear them. Submit below, and we might answer it on the show. Ask The Milk Check Ted Jacoby III: Welcome back, everybody, to The Milk Check podcast. Today we’re gonna have a market discussion. It is November 10th. We are in the last couple of weeks of the quote-unquote busy season, starting to get a feel for what we think is gonna happen to dairy markets as holiday orders are filled, and we transition into the long-term period of the year. In the last few weeks, we’ve actually seen prices drop, but it feels like butter’s kind of dropped down to about a $1.50/lb and seems to find at least a brief floor. We’ll talk to Joe and find out if Joe thinks we’re gonna stick around here for a while. The cheese market was up in the $1.80s/lb. It’s dropped to a little below $1.70, starting to hit a little bit of resistance. Jake will share with us a little bit about what we think is happening with cheese going forward. Nonfat dropped a little bit down to [00:01:00], about what Diego, about a $1.10/lb and had a little bounce off its floor. Meanwhile, the whey complex just continues to go up. We’ll check in with Josh and find out what’s going on there. Well, let’s go ahead and start with milk production. We just got released today, the September milk production, and it says it’s up 4.2%, which is a very, very big number. It’s November; milk is longer than it usually is this time of year. Usually, it’s quite tight, and it’s not quite tight, but I wouldn’t call it long. However, all the signs are there that once we get past the fall holiday order season, milk could get quite long. If September milk is up 4.2%, I think it’s safe to say that if that continues, we will be quite long milk as we transition from the typical seasonal tightness of the fall into the winter and the flush of the spring. 4.2% is a big number, and that’s not even taking into account the fact that the solids in the milk are up as well. That’s not the kind of tone that a dairy farmer wants us to set as we’re talking about what supply and demand looks like, but there’s a lot of milk out there, [00:02:00] Joe, does that mean there’s a lot of butter out there, too? Joe Maixner: Well, there’s still a lot of butter out there; sounds like there’s going to be a lot more butter coming soon. If milk’s up 4%, cream was heavy all of last winter and into last Spring, extremely heavy. If we have higher components, more milk, and we’ve got a full amount of milk coming outta California as well after coming off of bird flu last year, there’s just gonna be that much more cream in the system and more getting pushed back into the churns. So, it’s a very good possibility that we’re gonna go even lower than where we currently are. Volume seems to be trading well. The cream demand has been fairly steady, going into cultured products and the shorter shelf-life products. Cream’s still long, but it’s not swimming yet. Ted Jacoby III: Will we hold this $1.50 area through Thanksgiving, you think? Joe Maixner: Yeah, it seems like we’ve hit a spot where buyers are willing to step in. So, there’s a good chance that we could hang around this $1.50 area for the next couple of weeks. Once the last little spurt of holiday demand is over, we’re gonna take another leg lower. Ted Jacoby III: Okay. Jake, what about [00:03:00] cheese? Jacob Menge: I think we had a little reprieve from some cheese bearishness with the holiday demand. It’s tough, though, especially with this wall of milk that’s headed our way. Does it seem like the bottom’s ready to drop out? Probably not yet. But it still seems like it’s a possibility. It almost seems like the call before the storm. Ted Jacoby III: What you’re saying is: we’ve already dropped quite a bit, but we’re in typical low points, but it’s possible, considering the amount of supply coming our way, that there’s still another cliff to negotiate, and we could go a lot lower when it comes to Class III milk and cheese prices. Jacob Menge: If you zoom out a ways, going back to mid-2022, we’ve really not liked to go below that $1.55 level on futures. We’re kind of at another support level at this $1.65. Those seem like our two support areas, historically, for the last 3, 4 years. So, it’s probably gonna be one of those grinds lower if we move lower from here, versus that $1.85 to $1.65 was almost an air pocket drop. [00:04:00] It seems like the market’s gonna have to earn it if it moves lower from here, but it does seem like a possibility. Ted Jacoby III: When we get down to these levels, this usually tends to form the floor, and if we have so much cheese out there and so much milk out there that we’re gonna go lower from here, it’s probably not an air pocket drop; it’s probably a grind lower from here. Jacob Menge: Yeah, I think our lows, on the futures, for the past 4 years have been that $1.55. Don’t quote me on that, gimme a couple of cents on either side of that. But that means we got a dime from here to hit those five-year lows, you know, besides COVID. There’s a lot to be said for technical trading at those levels. So, it would take a big fundamental kind of wave supply to get us to crack that. Ted Jacoby III: Got it. Thank you. Diego. What about nonfat? What’s the international market doing? We know we have a lot of milk in North America. We have a lot of milk everywhere. And what does it mean? Diego Carvallo: Customers are also seeing the data, and it seems like they’re in no rush to buy nonfat. Right. Nonfat seems to be the product that is 00:05:00 consistently available. We haven’t seen a very tight market in several years. So, it seems customers are more concerned about other products like WPCs or maybe cheese, other products besides nonfat. So, they’re staying very hand-to-mouth. They’re being very flexible when it comes to origin and just buying spot and from the origin that offers them the cheapest skim milk powder delivered price, which, in most cases, for the past few months, has been either European or New Zealand product because of the shipment time, transit time, and tariffs. Ted Jacoby III: Has the inventory in the U.S. been building as a result? Diego Carvallo: Yes, it has, Ted. Yep. Inventory has been building. I was looking into the milk production numbers for September. California was relatively stable compared to the previous year. I think we grew by 2.5% versus the previous year. But the strong impact from avian [00:06:00] influenza was actually in October. So, that’s when we might see a big jump between California production for 2024 and California production for 2025. So, I thought the Milk Report was pretty bearish for nonfat. Next month could be as bearish or even more. I still believe that we’re gonna see a lot of product going into the dryers, and that’s gonna add pressure, and that’s gonna increase inventories for U.S. products. Ted Jacoby III: What does milk production look like in Europe? Diego Carvallo: They’re actually up quite a bit. I think their September number was also stronger than expected. I can’t recall the exact number, but it was stronger than expected, even though they have cut down on the farmer price, the FrieslandCampina, which is the number one benchmark. It still seems like, with corn moving lower, there’s still a number that incentivizes more milk production. For the next few months until we see a stronger cotton price, we’re gonna see plenty of milk from the U.S. and from Europe. Ted Jacoby III: [00:07:00] Okay, thanks. Appreciate it, Diego. Josh, so what about the protein market? Josh White: Yeah, same story. I don’t know why everybody else is having so many problems with their products because whey proteins are in demand and it continues to be very strong. WPC 80, WPI demand is outpacing supply. People are trying to book forward and can’t. By all reports, the demand on the consumer level remains pretty good. It’s a bit of an outlier. It’s definitely a mystery. A lot of the discussion centers around GLP-1 adoption in the U.S. Compared to a year ago, I think I read this morning, something like 12% of Americans are allegedly using GLP-1-related drugs for weight loss. Assuming that’s an accurate statistic, that’s a noteworthy number of people. There was a lot of discussion last year that as people come on things like Wegovy and Ozempic, at what moment do we mature to the point that people beginning their cycles of taking the drugs equal those coming off of those drugs? There’s just been a lot of headlines about more affordable access to these types of products. If that continues, that shifts this curve even a little bit further up. [00:08:00] What can reverse that trend or slow down the demand for the whey protein side? I think it takes a production response. I can imagine that any manufacturer that’s making whey-related products as a byproduct of their cheese production is exploring how to access this demand, in particular, the whey protein isolate demand. I don’t have the impression that equipment is any easier to get, and there are still plenty of obstacles in terms of making production changes at the processor side. It feels to me like at least through the first half of this year, we’re gonna continue to be under-supplied relative to the demand that’s out there. And I think it’s important to note that although we’re talking about good demand for these products, the GLP-1-related impact on the dairy market isn’t all positive. It’s certainly a positive on the whey protein side. Still, I think, as it relates to consumer demand for butterfat, cheese products, and some of the other snack foods that dairy products are used in, in the CPG space, people are consuming fewer calories. Throughout the rest of the world, this health and wellness [00:09:00] trend and this appetite for quality protein are everywhere. Their demand continues to be very strong internationally. Maybe a couple of other things that are noteworthy, maybe early indicators of the price stabilizing, it looks like Europe and the U.S. might be closer to parity for the first time in a while. So, we should watch that. We will see seasonal production levels start to increase a bit. I don’t know if that will one-for-one find its way into additional whey protein availability, but it certainly should help the situation as we get into heavier production months in the Northern hemisphere markets that produce these products. But other than that, demand remains very, very strong. Prices are firm. They appear they’ll continue to be through at minimum the first quarter. And I don’t think it’s going out on a ledge to say through the first half of the year. And then we’ll see what happens on the other side of it. But yeah, definitely a firm marketplace right now, Ted. Ted Jacoby III: What about milk protein concentrate, milk protein isolate? Are we starting to see the value of those products increase and close the gap between the [00:10:00] whey protein, since the whey proteins have gotten so expensive? Josh White: I’ll jump in and say we’re starting to see some early indications of that: people looking for substitutes where they can. If you’re not in these markets every day, you don’t know what products are available. If you’re in the CPG space or using it as one of many, many SKUs that you’re buying, you’re not aware of the functional properties and some of these other things. And there’s also a decision-making timeline that people have to consider. Not only are there labeling concerns and other things, but there’s a lot of protein that’s consumed as an ingredient and maybe not the primary ingredient. And oftentimes, those decisions are not easy to formulate or change, and they’re also made over larger durations of time, like annual pricing. We’ve had such a wide gap for a long enough time now that we have customers asking questions, and customers that are on the lower end of the valorization for these products are looking for substitutes. Those substitutes come in a couple of ways. They can come from substituting away from dairy, substituting for other [00:11:00] dairy or trading down to lower dairy-related protein products. We’re seeing people investigate all of them. Diego might be able to speak more precisely about what’s happening with the MPC prices. But generally speaking, the majority of people out there are starting to ask questions. I’m not so sure it’s having a material impact or moving the needle quite yet on substitution. Ted Jacoby III: Okay, well, it feels a little bit like a broken record. Milk everywhere, product everywhere except for whey, maybe that’s exactly the loop we’re in right now. Joe Maixner: We’ve talked a lot about supply and excess and whatnot, but demand, it feels like we’re increasingly teetering towards a crumbling economic situation with higher debt, people not having much discretionary income, and just overall demand being weak. Ted Jacoby III: So, if you’re looking at the demand numbers that we track, restaurant traffic is definitely down. It is clear that the economic environment we’re in, people’s pocketbooks are being stretched thin, and they’re cutting back on how often they go to restaurants and eat at [00:12:00] restaurants. Now, usually when that happens, there’s an offset into the retail side, and the retail side numbers usually go up a little bit. You are seeing that. Speaking to some of our branded customers, what they’re telling us is their sales are down, and the private label guys are saying, well, their sales are up, but frankly, not as much as they expected. The bottom has not dropped out yet. I think everybody’s watching it pretty closely. I think the industry’s concerned. I’ll leave it at that. Mike Brown: I think food service continues to be the big stickler on overall dairy sales. Grocery sales are okay. Food service continues to be weak, and that’s gonna affect us. Mm-hmm. Particularly, I think some of the high-fat products. Josh White: When we’re looking at it from the home front, it doesn’t feel real great, but if we’re looking at just how much additional milk we have globally, including out of Oceana and out of South America, and looking at how much of that surplus milk globally is being consumed in Asia right now, I mean they’ve been buying I wonder if that points to some brightness, at least some positives? Now, I also am a little [00:13:00] concerned that we have a consolidation of demand events, with Chinese New Year buying at the same time that Ramadan continues to move earlier and earlier every year. And prices are low right now. Feels like we might have a big concentration of demand that’s meant to satisfy local needs in the early part of 2026, but there has been a lot of international trade. Ted Jacoby III: I think you’re absolutely right. Ramadan and the Chinese New Year are both in February. Diego Carvallo: The word in the street, Ted, is that most of the Ramadan and New Year’s demand is gonna be fulfilled by the middle of November. Ted Jacoby III: In other words, by the time we get to January 1st, those orders are gone. Mike Brown: Yeah. And Super Bowl is 10 days before the start of Ramadan in the Chinese New Year. So, they’re all pretty close together. Josh White: I went back to saying that, hey, we’ve got a lot of milk globally, every surplus region’s producing more milk than expected. You mentioned earlier, Ted, that doesn’t even account for the component growth that we have here. That’s been fairly impressive. [00:14:00] What’s been interesting about that is it hasn’t felt this heavy. You might believe, well, it doesn’t feel as heavy because the Northern Hemisphere is at its low milk production points. Maybe it doesn’t feel as heavy because we’ve got a concentration of additional demand, but we’re trading a lot of anticipatory supply concerns. We’re really trading the fact that tomorrow we’re worried we have a lot of incremental milk, globally, that we don’t necessarily know where we’re gonna go with it. That’s not a reason to get bullish, to be super clear, but I do think that if we’re thinking through vulnerabilities in the market, that might be one. Ted Jacoby III: I would agree with that. I think there are three things that are probably keeping this market from going straight to the bottom. One, as you said, we’re at the low point seasonally for milk production in the Northern Hemisphere. Two, we are at the high point for demand everywhere. And three, you get to a certain point, and I think we are there in all products, we may actually be passed there in butter, but we are there in cheese, I think we’re there in nonfat, where [00:15:00] in order to go lower, you need to build up supply to the point where the inventories become actually burdensome, and I don’t think they have become burdensome yet, but I would expect that sometime in the first quarter of 2026, they will. You’ll start hearing reports that warehouses are full. You’ll start hearing reports that, from a cashflow perspective, whether it’s traders, whether it’s manufacturers, you have people who just need to dump inventory because they don’t have the cash flow to continue to hold inventory. Those are the things that drive markets to their lows. And so, if you think about the old saying: the cure for high prices is high prices, and the cure for low prices is low prices, that’s when you find out what the low price is, and then you go to that place that sends the strongest supply signal possible to suppliers that they need to cut back. Mike Brown: I was at a cattle show of all things this weekend and was talking with someone about feeding palm oil to get butterfat. His rule of thumb was that a pound of palm oil costs about a dollar, and you get about a 00:16:00 three-to-five-point increase in fat test from that. So, if you say 0.4 and you’re a 90-pound Holstein herd, that’s 0.36 pounds of fat. So, you’re paying a dollar to produce, there’s roughly 50, 60 cents worth of butter fat. So, we may start to see that come into conversations on rations. Josh White: And if we’re looking for optimism, I think that formula is pretty openly discussed in Europe as well. So, you’ve got a situation now where you have the on-farm milk price that is beginning to drop, the signals there that it needs to come down. It’s moving at a decent clip, to Diego’s point, maybe not enough to make any major change yet, but for planning purposes, things like feeding for fat might be a bit more vulnerable going forward there. So yeah, if we’re looking for what could start to correct our oversupply situation or what could potentially stabilize or support the market, we need time. I think that’s the most important thing that needs to happen, is we need time, and we need a milk price that curtails any additional production growth [00:17:00] for the moment so that demand can catch up. We talked about the U.S. situation and how the consumer spending situation doesn’t feel great. But globally, per capita butterfat consumption globally is growing. Per capita protein consumption is growing. We just need to give the demand time to catch up. Inventories might be starting to build, but they’re nowhere nearcumbersome. I would actually argue, our supply chain is still very thin. I wouldn’t even argue that we’re getting to a point where we’re normal by historical standards. I think that we have a pretty thin supply chain, and that’s everything from measurable inventory and reports, like cold storage reports and manufacturing stocks here in the U.S., but all the way through the pipeline. I don’t believe that many end users are sitting on excess product or have too many days in inventory. I think they’ve been quite comfortable buying hand-to-mouth. And the only product they’re being punished on right now for that is whey proteins. Ted Jacoby III: I think you’re right, Josh. I would agree with that statement. I think butter [00:18:00] is somewhat of an exception. Joe Maixner: I don’t know. Butter, it just depends on product mix, right? It’s CME eligible salted bulk. I think overall inventories are not burdensome. But we do have too much older CME-eligible salted bulk butter out there. Ted Jacoby III: That’s actually where I’m going, Joe. What do butter manufacturers do if they’re worried about having produced too many quarters and too many solids? They’ll just produce bulk. And so bulk is the overflow because they know the worst-case scenario, they can dump it onto the CME. And so that is where we end up with excess surplus, just like we get the same with a cheddar block in the cheese market. Josh White: How is international demand for U.S. butter at the moment, Joe, compared to where you would expect it to be and compared to where we were a few months ago? Joe Maixner: It’s steady right now. New inquiries are still coming in, but inquiries have lessened compared to a month or two ago; there’s a lot being made and shipping right now. International markets are starting to open their eyes to something other than [00:19:00] 82%. They’re starting to expand into the 80% because they are finally starting to realize that the numbers that they see on the futures don’t equate to the numbers they pay for an 82% product. And so anybody that’s really just using it for solids, for processing, is starting to convert, which is helping clean up some of that 80% salted butter, but it’s still not fast enough to really move the needle yet. Josh White: So, if the outlook for butterfat really doesn’t have any material upside in the near future, and we’re currently looking at Class III and IV prices, where they’re at, when do we start to impact the U.S. producer’s decision on making incremental milk beyond just the fat component? Are we close or are we still a long way away? Jacob Menge: Look at this Milk Production Report. We are up 268,000 head since June of 2024. That just keeps going up. There was an August revision of 71,000 head higher. The answer is a pretty [00:20:00] conclusive, not yet. I’m looking at the last time, September milk production beat the prior month, so beat August, which was 2001. And it just did that; September just beat August, and the last time it did that was 2001. Josh White: We’re not even talking about adjusted for components. Jacob Menge: That is correct. Joe Maixner: I can’t imagine that $16 to $17 Class III causes any worries right now for the farmers, with $4 corn and $1,200 feeder calves. Mike Brown: As long as you’re in a Class III market, if you’re heavy Class IV, your price isn’t $17. It depends on where you’re located, Joe. But for the most part, if you’re in a cheese market, it’s still decent. You’re right because the whey is also contributing a lot to that Class III price right now with a 70¢ whey market. Ted Jacoby III: Yeah. And the cows are all increasing in the states where there is increased processing capacity as well. Jacob Menge: These guys have had time to hedge this, and they still almost can hedge this, right? Going into later next year, where I think it’s gotta be at a point where they can’t hedge at a profit, and then you’ve [00:21:00] really got issues. Josh White: If we’re in a situation where the global economic outlook isn’t great, so that means we shouldn’t expect any major demand booms to pull dairy up We’re realizing supply growth in all major dairy surplus regions; the only correction for this is supply. And who’s the first to react? The obvious answer is it’s gonna be head-to-head with Europe and the U.S. Who breaks first? These are very, very different markets with different drivers, and they’re actually experiencing growth for different reasons related to the big picture, but different reasons. Europe just went through a situation where its butterfat carried the day. And butterfat was incredibly high, much higher than the U.S. price. They were an importer of fat from New Zealand, bringing in a noteworthy amount of product. And then now going into this year, they’ve seen a really significant drop, well below the support level that most traders would’ve held for butterfat. You assume [00:22:00] that they’re not gonna import a bunch of that product, forcing that product on the rest of the market. They’re going through a pretty negative situation right now as well. One thing you can’t forget about the European producer is that if you kill cows, it’s really tough to replace them, not for the same reasons we have in the U.S., that right now it’s just difficult to compete with beef. But they don’t wanna make those changes for a lot of regulatory reasons. So, they’re gonna hang on as long as possible. The U.S. model, we’re not in pain yet, generally speaking. Some smaller producers might look at higher beef prices and lower dairy outlook as an opportunity to exit. But there is way more structural expansion in motion or down the line that I think that train’s moving down the tracks. So, it’ll be really interesting to see if and who breaks first between the North American market and the European market. Ted Jacoby III: My hunch is it’s the U.S. market. I still think we’re a minimum of six months away, maybe even 12 to 18. Now there are signs, like you look at the Milk Production Report, the state of Washington is down [00:23:00] 8.5%. So, there are places where we are losing cows. Even though the majority of the country has gained cows recently, I would argue that with the drop in the butter price and the weakness in the nonfat market, California is the next one that I think will follow. They’ll struggle to get a decent milk price given that those are the two dominant price drivers for the California market. Diego Carvallo: But if you look at Idaho’s strongly up. So, it seems like a movement between Washington and Idaho. Ted Jacoby III: I think you could be right. Joe Maixner: California, their numbers this month were slightly higher than their peak production year 22. They’re on the uptrend. That’s a large ship that takes a while to turn around. Ted Jacoby III: I don’t disagree. I also think you’re still measuring against bird flu in California. You could argue that it may be a little artificially high. Joe Maixner: I actually questioned that because of the lower increase than I had anticipated for the September number, and bird flu didn’t actually start in California until October. So, we will see even larger increases next month forward in California. They [00:24:00] have that Class I plant that they opened as well out there. Mike Brown: They’re also getting hit with a big assessment, a lot of the producers out there, because the butter market changed, there’s been a lot of inventory loss, and that’s gonna hurt some producers as well. No one I talk to in California is worried about finding milk. They’re worried about finding a place to put it right now. Ted Jacoby III: I don’t think that’s isolated to being a California problem right now. Mike Brown: I would agree. You’re right. Ted Jacoby III: On that note, I think it’s a good time to wrap. Thanks, everybody, for joining us this week. Look forward to talking to you guys again soon. Thank you.