Butter is down. Powder is heavy. Cheese is struggling.
But whey proteins? They’re the shining star.
In this episode of The Milk Check, host Ted Jacoby III sits down with Josh White, Gus Jacoby, Diego Carvallo, and Jacob Menge to break down what’s really moving the dairy market this fall.
They’re the shining star now, but can whey proteins hold at $10/lb without burning out?
Listen now to hear Jacoby’s take on what’s in the stars for dairy this year and beyond.
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Ask The Milk Check
Ted Jacoby III: Welcome, everybody, to the September edition of the Jacoby Market discussion on our Milk Check podcast. Today, we’ve got Josh White, head of our dairy ingredients group. We’ve got my brother Gus to talk about what’s going on with milk, cream, and UF milk. We have Diego Carvallo on our international business and nonfat business teams.
And then we got Jacob Menge with risk management and trading strategy. So, Gus, let’s go ahead and start with you. It’s September. This is usually the time of year when everybody is shipping a lot of milk into the Southeast. How do things look in milk, and what’s going on in cheese and UF right now?
Gus Jacoby: Certainly, Ted, milk has gotten tight as it typically does this time of year. I wouldn’t say, though, relatively speaking, for mid-September that we’re all that tight. Obviously, milk production reports have been up recently; there’s more milk than we had last year. Yes, we’ve added processing capacity in [00:01:00] certain regions of the country, like the western portion of the upper Midwest, and, of course, the Southwest.
However, in many areas, early fall tightness does exist. But it’s a bit longer than last year. Where we really need to look at, though, is the component area and some of the products, such as sweet cream. That’s certainly very long.
We know about butterfat being much higher today than it was just a couple of years ago. And I would say the cream markets, which typically in early fall draw some pretty high multiples, those multiples are tempered to a fair amount. Cream can be had at a time when it is typically tough to find.
So, there’s no doubt that what we’re seeing out in the marketplace, and I would say from coast to coast, is more cream than what we’re used to. And certainly, more of a buyer’s market in the fall than it ever has been, at least in the history of the industry that I’ve seen.
Now, on the flip side, the protein markets are a bit interesting. I wanna let Josh speak on the powder side, but we are seeing that UF milk is having a strong comeback. People need protein, whether it be for fortification [00:02:00] needs and natural cheese, whether it be for health and wellness shakes, whether it be for what have you. That product is getting a lot of attention. And certainly, the one area that I’m seeing this fall that’s got some tightness to it.
Ted Jacoby III: Josh, what are you seeing on the protein side in your neck of the woods? Is what Gus is seeing with UF milk translating all the way over into dried proteins?
Josh White: The most interesting of the product categories right now and the one gaining the most attention is in the whey protein sector. We’re feeling pressure across a lot of the storable dairy products right now, but the one that remains very tight are the WPCs, in particular WPC 80 and whey protein isolate.
The storyline hasn’t changed a whole lot from prior discussions. We went into the year, and there was some trade disruption that masked how tight the market was. We knew a lot of capacity was coming online this year to respond to the demand signals that we’ve been seeing unfold over the last several years.
But where we stand today, in September, with a line sight to the end of the year, is [00:03:00] it doesn’t feel like our production out of the U.S. is meeting not only the U.S. demand, but the global demand. This is more of a global situation than just a U.S. situation. The key production regions for the higher whey proteins suitable for sports, nutrition, health, and wellness applications, and others come from Europe and the United States.
And in both markets, prices are very high right now. Whey protein isolate had stabilized as we went into the third quarter, somewhere on either side, at $10 a pound for WPI instant. Today, there’s a lot more discussion anecdotally that we’re seeing prices closer to $10.25 or even $10.50 per pound in certain instances.
Whether it’s the driver or it’s the entire market, that certainly had an effect on WPC 80 prices. WPC 80 is a product that we have seen more production come online. Whereas, with WPI, we’ve seen people really trying to drive yields, trying to [00:04:00] just push as much product through their whey protein isolate dryers as they can.
Whereas, WPC 80, again, new production coming online, but that hasn’t gone smoothly in every case. As a result of that, the market is now really responding with prices above $5 a pound. If we go back in history, that’s a demand-killing price. The question is, is that still a demand-killing price?
As the majority of market participants would argue that the per unit value of protein in whey protein products is continuing to appreciate, and the demand we’re seeing is that. The demand is not only strong demand in the sectors we’ve been selling to, but we’re also seeing a lot of inquiries for WPI and WPC 80 going into like consumer packaged good applications and a lot for trials, which suggests to me that people are really looking for new product development in that space to capture some of this demand movement that we’ve seen out there.
And that’s [00:05:00] also gonna change a little bit the elasticity of the product. Some of these products that it’s going into, protein is a very important price element, but it’s not as high an inclusion rate as you might see in protein shakes or something along those lines. So, it’s a bit unclear to me how that unfolds.
But right now, we’re staring into a market where the U.S. is driving prices higher. Europe is at a higher price, and the rest of the world is scrambling to catch up and get the protein that they want. What that means and how that drives decision-making for the dairy processor, in particular, the cheese plants, is yet to be seen, but it’s certainly impacting their interest in bringing milk in or making cheese in order to get to this whey protein. And so, I would kind of volley that back to you guys. How important is that from a cheese processor, as we look right now, in September, when milk is seasonally at its lower annual levels, and some of these plants can decide whether or not to remain full.
How [00:06:00] are the cheese plants handling this when they want the whey protein? But cheese feels like it’s a little heavy?
Jacob Menge: Ted, you wanna take that hot potato?
Ted Jacoby III: I look at it this way. When milk is plentiful, like it has been this year, they’ll grab the milk where they can, because worst-case scenario, you can dump the cheese onto the CME if you’re a big cheddar plant. And you can discount it at least to some extent as a mozzarella plant.
I think it’s been harder for the mozzarella guys this year because historically, you’re making low-moisture part-skim mozzarella, you’re spinning off all this cream, you’re getting $3 plus a pound on the cream. That makes it a little bit easier to make sure you still extract the value from the milk when you’re selling off the cream.
But now, the butter price is $1.85, $1.82 after today. And so, it’s a little bit of a different equation. There’s a limit to how much you can discount the mozzarella to make sure it clears. This year, however, I think there’s been an opportunity in that the export market has been strong enough, so they’ve been able to go ahead and move that [00:07:00] mozzarella into the export market, so they can keep clearing it and then continue to make money making WPC 80 or WPI. I think the bigger issue may be next year, 12 months from now, because if the cheese price and the butter price stay low, ’cause right now at 3.4% milk production increases and even more on the top of that in terms of components, I think there’s a very real concern that we’re gonna see some really low cheese and butter prices in Q1 and Q2 of next year.
And given how valuable those dairy cows are if they sell them for beef, I think we could see some very high slaughter rates, which will lead to some pretty significant decreases in milk. You may, by this time next year, have some very real competition for milk in certain sectors of the country.
In that environment, what’s a cheese plant gonna do if the cheese market is still relatively weak, but they can make money on the whey, they’re gonna have to pay a bigger premium for the milk, it’s the only way they’re gonna be able to get what they want. And so, I think you [00:08:00] could create a very real opportunity for those sellers of milk to really push for a higher premium and extract it because they can extract it out of the whey.
Jacob Menge: You both have said something kind of interesting. Josh said it without saying it, and I guess I wanna poke you a little bit, Josh, on it. You kind of alluded to it, but for now, this demand seems almost limitless.
Elasticities might be changing. And then, Ted has just hinted at: the situation kinda works today, but down the road it might not. And so, I’m curious, Josh, what do you see being the thing to take the wind out of the sails of this protein market, and I’m not talking necessarily over a 5 to 10-year period.
I’m more talking about what the next pullback looks like, and does that line up with the timing that Ted just brought up on the cheese side? Because if so, it could almost be a self-correcting problem, or it could add fuel to the fire if it doesn’t play out that way.
Josh White: I’m gonna start with what Ted said about where we could be a year from now. [00:09:00] And the problem is, as a trader, I can’t even think about that when I know that we’ve got increasing milk supplies at very, very strong levels in all major milk regions of the world, and going into our heaviest six-month to nine-month window of milk production. Right? So, that’s all I can see right now. And so, when I think about that from a whey protein standpoint, all I think about is that the cheese plants are going to have to process milk. As a result of that, they’re going to be making whey solids in some way.
And at the moment, it’s clear that you’re gonna maximize your production of higher whey proteins. That’s what I’m looking at going forward at the moment. Now, until milk changes, cheese likely will continue to win over milk. And the reason I believe that is a capacity-driven thing — where the milk is growing versus what type of processing is in those regions — and a nonfat dry milk and a butter market that just don’t feel very good right now. And okay, so butter, we can debate that and should debate that a bit more, but let’s just talk [00:10:00] nonfat for a minute. The global skim market is awful.
I don’t even know how to say it differently. It’s being driven down by Europe; it’s being driven down by New Zealand; and the U.S. is continuing to watch our price go down despite our production not being very, I don’t have the numbers in front of me, but not being all that impressive and our inventory levels, I think, are lower than a year ago.
I don’t, maybe someone can correct me if I’m wrong on that.
Diego Carvallo: Pretty stable compared to last year. Yeah.
Josh White: Yeah. So the weakness in nonfat prices in the U.S. It is not a supply issue out of the U.S. It is a global demand issue. Just watching some of the recent market reports, we have milk production growth in Europe, and milk production growth very impressively out of the U.S.
A good forecast for the heavy months of September, October, November, and December in New Zealand. The only regions that are down, I think, are China and Australia. And if we’re paying attention to demand, demand is sideways at best in most parts of the world. [00:11:00] So, there’s not gonna be a big pull, especially with weakening butter prices for Class IV milk, and we’ve got a lot of cheese capacity.
So, when I think about that as it relates to the supply side of the whey protein complex, things should only get better as some of these new facilities that have come on and have struggled to get up to capacity come on and start to produce. Now, the product mix from that is still a little confusing.
As to how many of them are going to be able to make a high-quality WPI, who’s making the clear whey protein isolate, the acified products that are driving really, really strong demand that feels almost inelastic, who’s making WPC 80s? That’s still a little abstract, but what I know is they’re gonna have plenty of solids in the months to come, as we’ve gotta process that milk through Class III facilities.
That didn’t answer your question, but that’s the clouds hanging over it. So then, as we think about what could change the price direction, I’ve said it before in many meetings, and I still don’t have a high level of confidence that we as an 00:12:00 industry know how to manage the supply chain extremely well on whey proteins. It’s a quarterly priced product. There’s not a tremendous amount of forward pricing — more now than ever before, but still, a low percentage of the total volume sold is sold beyond the next quarter. And as a result of that, the retail movements take longer to materialize.
So we don’t know until we’ve got at least one or two quarters of business done if we’ve overpriced this stuff. I don’t think we’ve corrected that. I think we may have softened that, though. Things like CPG companies at the lower inclusion rate, things like great demand growth relative to the supply growth, things that might have softened that cycle that we experienced before.
But if you look back, we’ve repeated the cycle multiple times. We go up, we set new highs, everything feels great, and the price gets cut in half inside of 18 months. We are on an extended cycle right now. We credit health and wellness-driven demand globally despite other consumer product trends pointing [00:13:00] lower.
All of that could be true, but I still believe that at some moment this thing cycles, and what could result in that cycle is overpricing it too quickly. And I think the market’s done a pretty good job of not doing that. If you really look at how tight it’s been, people just aren’t increasing by dollars right now.
I mean, it’s really been a methodical price increase over the past year, at least from the processing side, on the commodity side of this. Do we start to accelerate that when people just simply can’t get it and find a price that kills a lot of demand, especially for maybe those lower utilizations?
Maybe. When could that happen? Early 2026? Yeah, maybe. I mean, I would be betting we’re talking about the middle of the year. Another factor that could potentially reverse it slightly is a milk response, and what it will take for a milk response right now is a very low milk price.
Arguably, the non-milk income that these farms are receiving is real. These farmers have put a lot of equity away. The corn price continues to work down. The other input costs continue to go a [00:14:00] bit lower. We’ve got our heaviest production season in front of us.
I agree with Ted that there are a lot of cows vulnerable to slaughter if margins get bad enough. I would argue you’re not going to cull them unless it’s very, very bad before you get through your seasonally heavy milk production volume. So, post-spring. That’s when the response might happen. The storyline as a trader for the next six to nine months has to be supply, supply, supply.
We’ve got plenty of milk. How does that translate into the products that we have, and where do we process them? After that nine-month period, okay, we can start to really think about what the milk production response would look like.
Ted Jacoby III: I would agree with that.
I think it’s very easy to underestimate, however, how much a dramatically lower butter price is going to affect a dairy farmer’s milk check, cause we tend to think in terms of $15 Class III milk is bad. But the last few years, they’ve been getting 20, 30%, and I haven’t done the [00:15:00] math, so, for anyone out there listening that says, “Ted, those numbers are way too high.
It’s not that much.” I apologize ’cause I didn’t do the math, but they were getting a substantial addition to their milk check because of the components, because of the higher butter fat, because of the higher solids in the milk. If suddenly they’re getting half as much, not just a lower milk price per hundred weight, but also lower in terms of the components on top of that, that could be a really big number.
It’ll be interesting to see how it plays out.
Diego, one of the things that I think we really should be talking about is how so many of the issues we have are on the demand-driven side. We’ve got domestic cheese: demand is down, domestic butter: demand is down, and restaurant traffic is down.
Class I milk: sales are down. You’ve got this shining star in whey proteins. A little bit less of a star in other milk proteins, but everything else looks ugly right now. Yes, exports are good, but exports are good because our price of cheese is lower than everywhere else in the world, and that’s just exacerbated by the fact that the dollar is 10 to 15% weaker, too. So, what’s the status on nonfat?
Diego Carvallo: So, nonfat is feeling very heavy right now, Ted. As you guys have been discussing, it’s both a combination of the demand and supply. In the U.S., yeah, supply is relatively stable, inventories are unchanged versus last year, it doesn’t seem like it’s a heavy market, but when you add into the equation that demand and exports out of the U.S. have been very slow, and at the same time that most of the origins are making big improvements in their milk production and skim milk powder production numbers, that’s when you start seeing an imbalance. The market is anticipating that imbalance, and that’s why the curve is inverted. And everybody is feeling like we could see numbers that are still lower than where we are right now. The market has already moved a couple of hundred dollars lower [00:17:00] in the past 10 days, and we are close to levels that I would call historically very appealing and very supportive. But it seems like New Zealand is still gonna have plenty of product. Europe, same thing. South America. We could continue finding lower prices until those prices actually bring demand up.
Worldwide demand for nonfat has been unchanged, at best, in my opinion, while supply has been trending higher.
Ted Jacoby III: Jake, if we look at it purely on a technical level, where’s the next support point in nonfat?
Jacob Menge: Yeah, that, like $1.10 level has been a really nice long-term support level on the nonfat side. I think from what we’ve discussed, I wouldn’t be surprised if we test that at all. But it seems like it’d have to be a grind lower from there if we get to that $1.10 level.
Ted Jacoby III: And I think it’s fair to say that everything lower from here is a grind lower. You’re [00:18:00] at that point where you don’t have a free fall to anything anymore because you’re already historically low.
And so the only way you continue to go lower is by grinding lower.
Jacob Menge: Cheese is similar to that $1.10 in nonfat; it’s probably in the mid to upper $1.50s. So maybe you get a little bit of a move to there, but it would definitely be a grind through the $1.50s on cheese.
You look at butter, I think that’s a little harder to quantify just ’cause it’s been a while since we’ve been here. After we’ve seen what it’s been in the past month and a half, a 25% move, you gotta figure there’s a breather at some point there.
So, I agree. I think moves lower from here are gonna have to be earned by the markets.
Ted Jacoby III: Yep. It’s still hard for me to imagine that we’re having these conversations about historical lows for nonfat, for butter, even for cheese, maybe not quite yet for cheese, but we’re getting there.
We’re in shouting distance, and we’re in September, and so we’re in the front of the fall period where [00:19:00] demand is usually a little bit better. It just doesn’t bode well again, except for our shining star in whey proteins. That just doesn’t bode well for how these things are gonna play out over the next nine months.
Jacob Menge: You throw the curve balls in there, of we’re kind of this post-inflationary period, probably still in an inflationary period. And so you adjust for that, and the lows look even worse than they did last time we were here. You add in the dollar, that’s another factor in there.
The market’s just kinda ugly right now, unfortunately.
Ted Jacoby III: Josh, I’m gonna circle back to the question you asked me earlier. Given that butter has really low prices right now and demand just doesn’t seem to be there cause it’s been so overwhelmed by supply, and nonfat has low prices because demand simply isn’t there,
I think you still keep cheese plants full so that they can get the whey because your Class III price is still in the same area code as your Class IV price. And so, if you know there is a really nice, profitable demand for the whey protein, and you know you can clear your cheese, you’re gonna go ahead and process the milk and do it.
Josh White: So, we’ve spent a lot of time beating up what the butter market looks like when Class III facilities, particularly mozzarella facilities, win the milk. I don’t know that I’ve got a clear vision of what that looks like still, but as we think ahead to the next few months when milk volumes begin to pick up, and let’s go under that premise, that Class III wins that milk and that we’re in the near future, not looking at any major producer milk response, it’s gonna take some time for that to materialize. What is the demand outlook globally on the cheese side? Are we gonna continue to win business and clear it?
Another question is related to butterfat. This butterfat market, we’re talking about how bad it is and how weak it is. Correct me if I’m wrong. Aren’t our inventories lower than they were a year ago? And is this anticipation [00:21:00] because the world market, although it is under some pressure, is still significantly higher? Is there any chance that we’re overselling this butter market?
And what does that do to this decision-making model if we do find some support?
Ted Jacoby III: My strong opinion is that our butter market went to this level in August and September for a very specific reason.
And the reason is: historically, we build butter inventories up into July, and then we start pulling them down in August, September, October, and November. We have so much butterfat coming right off the cow right now that they’re taking the cream into the butter plants. And so even if we’ve looked at the last cold storage report, which I believe as of the middle of September is still the end of July report, it may say our butter inventories are similar to last year, but I think everybody who’s
in the butter market right now is saying there’s no way we can run our butter market inventory down like we usually do, and we’re gonna end the year at significantly higher inventory levels of salted butter than we [00:22:00] usually do. That’s what this market’s reacting to. Nobody’s buying bulk butter to microfix and process right now because they can buy the cream even cheaper, and markets are forward-looking.
That’s my strong opinion.
Josh White: So, then back to the cheese question, will we continue to win enough international business to clear the additional cheese, even if milk volumes continue to increase seasonally and Class III wins the milk?
Jacob Menge: I don’t think we have a choice, right? We have to compete on price.
Ted Jacoby III: If I reframe the question this way, if we have to go to $1.25 in cheese to clear our cheese, will we? I think we can go to $1.40, and we’d still clear the cheese. But once you go below $1.40 into the $1.25s, I think that’s a legitimate question.
But we still have some space below where we’re at today, at around $1.62, but yes. We’d go hit the bid.
Josh White: So, here in September, when our milk is seasonally lower, and we’ve added all of this production capacity, we clearly have the choice on where milk goes between Class III and Class IV. How much [00:23:00] of a discount does Class III need to be for Class IV to win the milk?
Ted Jacoby III: I look at that question a little bit differently in that the majority of all of our Class IV plants in the U.S. are co-op owned, which means they’re owned by the farmers themselves. So, I’ve always thought of it, whereas over and above their typical supply contracts, a Class III plant has needed to pay $1.50 to $2 more for the milk than the Class IV price in order to pull additional milk away. And the reason I’ve always used a $1.50 to $2.00 is the fixed cost of processing that they’ll still have to pay even if they don’t run the plant.
But now, if we flip it on its head and look at it the other way, and say, what kind of discount do the cheese guys need?
I would say this, I don’t think they’ll need to pay much of a discount. Maybe that marginal supply, that last 5%, is just by being opportunistic. But for the most part, if you can sell that cheese into a commodity market, if it’s a Cheddar plant, it’s that [00:24:00] CME cheddar block price, so, if you can sell that cheese into a commodity market, and you can still make money on the whey if you’re processing it into whey protein, and I think we all know that anybody making whey protein right now is making money, you don’t need to pay a discount to do it, and you’re gonna make money off of it.
But I think that equation is very different for a medium to small size specialty cheese plant in Wisconsin that’s selling a liquid waste stream than it is for a big cheddar plant that’s making WPC 80 or WPI, right on premise.
Josh White: Rewind three years. The argument was always that milk really doesn’t move that much between Class III or Class IV because, logistically, it didn’t make a ton of sense.
That I believe might be a bit different today, with a lot of new capacity in the Southwest and upper Midwest. When we’re at our peak milk supply, so if we’re in May, with all the capacity that we have and such strong milk production and anticipated milk production as of today, are we maximizing that capacity?
Or are we [00:25:00] still left with a choice between marginal milk moving between classes?
Ted Jacoby III: Assuming all of the new plants are running at full capacity and not having any production problems,
I think we can maximize all that capacity. Obviously, there are issues of whether there gonna be enough milk in each particular region to fill all the plants, assuming that there is, yes, you’ll fill all the plants up.
But I think it’s a really big if when I said if all the new plants are running correctly or running well.
Josh White: So, we spent a few minutes talking about what could change the firmness and change the direction there. What could change the climate for the other key pricing products: nonfat, dry milk, cheese, and butter?
Ted Jacoby III: I think butter is the easiest of those three to answer, and this is why.
Butter has, for the last 15 years, restricted demand through price. That’s why we’ve had $3 butter high, $2 butter for basically the last 10 years, and it’s [00:26:00] because there’s been a bigger demand for butterfat than there has been supply. I think butter is going to a place now where people are gonna start figuring out uses for butter that they had gotten out of over the last 10 to 15 years, ’cause the price was too high.
I think anybody who’s talking to someone who’s really fully involved in dairy markets will give advice that this is a long-term trend. And I think you can plan on having much more economical butterfat prices going forward, at least in the next five to 10 years.
Ted Jacoby III: If there have been people who have formulated away from butterfat, now they’re gonna start formulating back to butterfat. If there have been new product innovations that have been sitting on the shelf because the butterfat was too expensive, now they’re gonna get ’em off the shelf and start looking hard at ’em.
You could see over the next two to three years, some pretty nice increases in demand at these price levels. Cheese is a much harder one. The reality is, even at $1.60, we are not too far out of [00:27:00] the typical range of the price of cheese over the course of a year to two-year period, which means we’re not necessarily yet at a place where people are gonna start innovating in cheese in ways that they haven’t been.
Ted Jacoby III: Your biggest opportunity to increase demand is still international. And so I think the U.S. has to be really aggressive internationally, and I do think the international market is expecting us to be. I’m gonna throw nonfat to Diego because nonfat is the really hard one for me. I have really no idea where we can find skim milk powder in nonfat demand.
Diego Carvallo: Ted, I was really hoping that you would take that one. It’s all so difficult, right? Because the tendency is for greater demand in higher proteins and not necessarily in nonfat, right? But at the same time, I see that nonfat could get to a price, let’s say $1.10 or maybe below $1.10, where it becomes really appealing and interesting for different applications, which is gonna bring up a demand that we haven’t [00:28:00] seen at least in a strong presence, in several years. Right? There’s a level which we’re probably relatively close to, where we start finding additional demand that could all of a sudden shock the market to the upside.
Josh White: I think we need to pay attention to what we just experienced with the whey products as well. I mean, why is the commodity that is used in the milk price formulas, nonfat?.
Over the past year, we’ve actually seen pretty volatile whey production changes. We saw some plants go offline in lieu of producing whey protein concentrates ’cause the market is telling whey producers and cheese producers to make a higher concentration of whey protein. Why won’t we see the same thing in the milk powders camp?
It’s clear that people want a higher concentration of dairy protein. And the question is, will they value the milk proteins as they have the whey proteins? I think, arguably, they will. It is just gonna take a little bit of time.
Ted Jacoby III: Josh, I agree with you. Take nonfat and split it into two [00:29:00] parts: the lactose and mineral side, and then on the other side, put it on the casein side, the protein side. I think everybody’s been trying to find new, innovative ways to utilize the lactose and minerals for some time, and it’s been a very big struggle.
Not only is it not a valuable enough component for there to be good opportunities. You’ve also been in a food environment that has been minimizing sugar consumption rather than maximizing it. So, it’s just been decreasing in demand overall. That’s the hard part, to the extent that now they’re not even drying it and feeding it to the cows in many places.
The casein has been an interesting one to me because over the last 10 years, clearly, the value of the whey proteins has started to exceed the value of the casein. And if we’re maximizing the use of casein in cheese through cheese production, what else can we do with that casein molecule? Protein is valuable.
Amino acids are valuable. Just like I was talking about how we’re gonna start seeing probably innovation on how we’re gonna use [00:30:00] butterfat in products again, where we hadn’t for a while,
I think it would be very fascinating to have a conversation with a protein chemist about what you could possibly do with those alpha and beta casein molecules, those casein micelles, whether it’s applied as is, or whether you find an enzyme that can cleave them in just the right way to create a different protein that is highly valuable.
It’s probably one of those proteins, because it is such a massively large protein, there is value in that protein where the pieces probably exceed the value of the casein protein itself. I’m not a protein chemist, so I think that’s a good guest speaker to have on our podcast sometime soon.
Josh White: Ted, it sounded, during our low milk season, like we’re not very optimistic on the key drivers for dairy pricing.
Josh White: I’m assuming that all are in agreement that we’re not expecting any major reversal in the consumer demand area in the coming months. It has to be supplied.
Jacob Menge: We need a milk production response.
Ted Jacoby III: We [00:31:00] do. I think we are headed that direction with some significant momentum based on what we’ve seen in price action over the last couple of months.
Josh White: I want to just revisit the point, even if we saw a pretty strong continuation of this lower milk price, when is the earliest we expect to see a serious response? Based on the equity producers have put up, the trend of genetics, the lower feed costs, the non-milk revenue that’s being created, and where we’re at in the calendar, it feels to me like that would be post Northern Hemisphere flush.
Ted Jacoby III: I will make two tweaks to that comment. The first is, don’t underestimate how drastically we could see a drop in milk production in California in the spring, given how low the butter prices dropped. Because if there is a group of dairy farmers who are just looking for a reason to exit the business, that’s the group.
On the West Coast, you could see some significant drops, less so, [00:32:00] especially in the concentration of larger farms in the Midwest, like the I-29 corridor or the Panhandle of Texas. I think you’re right. I think it’s less likely that you’ll see significant decreases in milk production in those areas. Wisconsin,
Eastern Ohio, Pennsylvania, it’s a lot harder to predict. You’ve got smaller farms; their cost of production is higher, and they may get hit harder. But those are also the regions where they tend to get some support from the local processing plants, who wanna make sure that they continue to produce the milk.
I think it’s been a great discussion, guys. Thanks for joining us today, and all our listeners out there, thank you for continuing to listen to us. We’ve got a couple of great podcasts coming soon, with some guest speakers, and I look forward to talking to you all soon.
