Dairy Processing - March/April 2024 - 67

been running strong for the past three years, while consumer
confidence and spending remain subdued. Signs point to
the weak demand in China being driven by scarring from
the intense and protracted COVID-19 lockdowns and now a
softening housing market. It is hard to get bullish on Chinese
demand until there is either evidence that its domestic milk
production is declining or that consumer confidence has
sustainably improved.
On top of the weak Mexican and Chinese purchases,
demand from Southeast Asia has been patchy. Its imports
were weak in Q3 last year, before they surged in Q4, and
now they look like they cooled off again in early 2024. With
NFDM/SMP prices falling during March, it appears Southeast
Demand for WPC and WPI,
both export and domestic, has been
strong and inventories have been
pulled down to low levels which is
keeping their prices firm. "
Asian buyers will come back into the market, but the buying
has seemed more price sensitive than it used to be. So the
supply side in the Northern Hemisphere is running tight, but
production is up in the Southern Hemisphere and demand is
currently leaning spotty to weak, and that is keeping prices
from rising.
DRY WHEY EXPORTS
Whey is the byproduct from making cheese. It can be dried
to make dry whey, or the protein and other solids (mostly a
sugar called lactose) can be separated and dried separately
to produce whey protein concentrates (WPC), whey protein
isolates (WPI), and dried lactose and dried permeate. Prices
for all of these products rose during the second half of 2023
and into 2024, but dry whey prices were falling during March.
Dry whey exports have been weaker than expected and
the higher prices have slowed domestic demand, which is
leaving a little extra product looking for a home. Dry whey
prices in Europe have been falling since mid-January, as good
cheese demand in the region resulted in strong dry whey
production. With EU prices running below US prices for
nearly two months, European exporters have likely locked up
more market share, which will continue to hamper US exports
in the second quarter.
Demand for the high protein whey products, WPC and
WPI, has been very strong. Both export and domestic sales
are growing and inventories have been pulled down to low
levels, which is keeping their prices firm. We've seen a few
Price per pound of protein (USD/Ib.)
$7
$6
$5
$4
$3
$2
$1
Jan 21
Jan 22
Jan 23
Jan 24
* Dry Whey * Nonfat Dry Milk * WPC80
random loads of aged product or less desirable brands offered
to the market in mid-March, but prices for most products look
like they will be steady to higher during the second quarter.
The high WPC and WPI prices are going to slow down
demand, which might soften the market in the second half of
2024. Prices could soften even further in the first half of 2025,
as a number of new cheese plants and expansions of existing
plants are expected to come online and most of those plants
will be pushing whey into WPC/WPI. But that is still a long
way into the future.
The dairy markets are volatile and market conditions can
change quickly. If you are interested in trying to smooth out
price movements, either as a buyer or a seller, always feel free
to reach out and we can talk about ways to potentially hedge
prices for the various powders.
Editor's note: This material should be construed as
market commentary, merely observing economic, political
and/or market conditions, and not intended to refer to
any particular trading strategy, promotional element or
quality of service provided by the FCM Division of StoneX
Financial Inc. ( " SFI " ) or StoneX Markets LLC ( " SXM " ). SFI
and SXM are not responsible for any redistribution of this
material by third parties, or any trading decisions taken
by persons not intended to view this material. Information
contained herein was obtained from sources believed to be
reliable, but is not guaranteed as to its accuracy. Contact
designated personnel from SFI or SXM for specific trading
advice to meet your trading preferences. These materials
represent the opinions and viewpoints of the author, and do
not necessarily reflect the viewpoints and trading strategies
employed by SFI or SXM.
Nate Donnay is the Director of Dairy Market Insight at
StoneX Financial Inc. and has been applying his expertise
in large complicated systems and statistical analysis to the
international and US dairy markets since 2005.
DAIRYPROCESSING.COM | MAR-APR 2024 67
Source: CME, McCully Group, StoneX Calculations
http://www.DAIRYPROCESSING.COM
Dairy Processing - March/April 2024

Table of Contents for the Digital Edition of Dairy Processing - March/April 2024
