The Milk Check

As summer fades, we're moving into peak demand season for the U.S. dairy market. Keep on top of shifting trends with The Milk Check. Guest host Josh White and a panel of industry experts discuss the latest trends and projections for U.S. dairy as we approach this critical period.

💸 Blue tongue’s impact on European milk production.🧈 Butterfat is bucking the trend with a strong inventory.🍦 Cream prices have softened after a brief surge in the last few weeks.🧀 Cheese markets set record-high prices this year, but is the tide turning?🐄 Milk powder prices are on the rise as we head into peak demand season.

Plus, we’ll look ahead to 2025: What impact will the expanded cheese production capacity have on milk prices in the second half of the year?

Get the market scoop from Josh White and his team, including Diego Carvallo, director of dry dairy ingredient trading; Greg Scheer, manager of milk marketing; Jacob Menge, vice president of risk management & trade strategy; and Joe Maixner, national sales manager of dairy ingredients.

Intro (with music): Welcome to The Milk Check, a TC Jacoby and Company podcast where we share market insights and analysis with dairy farmers in mind.

Josh White: Hey, everyone. Welcome to The Milk Check. Today is Friday, September 20th. I am Josh White, filling in for Ted this week. We've entered that time of year when producers or processors, customers alike, we all put that summer fun behind us here in the Northern Hemisphere and focus a lot more attention on what's happening in the market today, closing out the year and thinking about what could influence the next calendar year. As a result, we think it's a great time to have what TC would call a good old classic market discussion.

Today, I'm joined by most of our traders here at TC Jacoby and Company, and I'll lead that discussion in Ted's absence. So I'll do my best Ted impression and say, "Hey guys, where do we start?" Does anybody have a thought as to what we should cover at the beginning? I personally think it all starts with milk. Greg, I would love your opinion as to what's happening today and the market as it relates to milk moving across the country and what your thoughts are looking ahead.

Greg Scheer: Thanks, Josh. Yes, we've seen tighter spot markets this summer and this spring compared to previous years. We have tighter milk supplies. We have a lack of replacement heifers. We have very expensive replacement cows. Producers have been holding back from culling as heavily as they usually do. We just don't have the replacements to increase milk supply. So we have firm spot markets. We've seen that this summer. We expect to see that this fall, but we are setting up for 2025 to be a tighter year for milk supplies because of those reasons.

Now, that could be mitigated some. I've heard of very good harvests being put up, good quality, cheap feed, and producers will be able to feed those cows maybe a little better, but the fact of the matter is it's going to be hard to get cow numbers up. They'll probably decline, and the cost of any kind of replacement will be high.

Josh: So Greg, you're talking through those dynamics and that doesn't take into account what the industry has discussed a lot about all these new plants coming on a new capacity. We've got another plant firing up any day now, another large one in the southwest that will likely start early in 2025, and a few plant expansions in the upper Midwest. How do you think that that influences this tightening milk dynamic as we go into next year?

Greg: It will make the milk competition just that much stronger. For the producer, it should help get higher premiums for milk in those competition areas. Plants will have to plan ahead, and even in some regions where milk's traditionally been very long and can get all the milk they want, it will be harder next year. It's just more competition. It will maybe pull some milk from other plants, and some older,

In today’s episode of The Milk Check, we’re joined by Tim the Dairy Farmer, a farmer, speaker and ag comedian. If you think dairy farming is no laughing matter, then you haven’t met Tim. Tune in for a special episode of the podcast, where Tim and the Jacoby team discuss:

Strong harvest likely leading to lower feed prices

Could dairy heifer prices rival Black Angus prices in the near(ish) future?

Could the milk price reach $30?

Things you should never plan near the cow pasture

Plus, learn how Tim got into the comedy biz and how he silences the hecklers.

Don’t miss this episode of The Milk Check with Tim the Dairy Farmer.

Intro audio (with music): Welcome to the Milk Check, a TC Jacoby & Co podcast where we share market insights and analysis with dairy farmers in mind.

Ted Jacoby II (T3): Welcome, everybody, to the Milk Check. This month we've got a very special episode, we have a special guest, Tim the Dairy Farmer is with us today. Tim is going to ask us what we think is going on with these dairy markets, and we're going to do our best to give him an answer, and we'll see where the conversation goes from there. Tim, why don't you tell us a little bit about yourself?

Tim the Dairy Farmer: I've been in the dairy business for 30-something years, taken my licks, started doing standup comedy as Tim the Dairy Farmer about 22 years ago, and I speak at agriculture events. I'm a standup comedian, I'm not a motivational speaker. I'm horrible at marketing myself there, Ted. So basically I'm a dairy farmer that does standup comedy, and they hire me to come to meetings, to wake up after guys like you talk. And here's another thing, this podcast is called the Milk Check, correct?

T3: Yes.

Tim: All right. This is how you know I'm a dairy farmer, y'all call it the Milk Check, I'm just happy my last milk check had a comma.

T3: Well, that's why we call it the Milk Check, because we want to talk a little bit about markets and what's affected dairy farmers' milk checks. Hopefully most dairy farmers do have a comma right now because prices are halfway decent. But before we go to markets, Tim, I've got to ask, tell me about one of the most interesting agricultural events that you participated in. I'd love to hear a good story.

Tim: Oh, man. I've got so many. It's not the good ones that you remember, it's the horrible ones. There's three shows, there's the one you planned to do, the one you do, and the one you wish on the drive home that you would have done. I've had all kinds of stuff go wrong. No, for the most part they're always fun.

T3: All right.

Josh White: So Tim, how often are you on the farm versus having to hit the road for comedy?

Tim: I probably go off and do 30, 35 shows a year. Normally I fly out the night before and I'm back the day after. My brother's always been my biggest supporter, he covers while I'm gone. I couldn't have made it this far doing comedy without my brother's support, because we're partners in the dairy and he's always covered for me when I'm gone.

T3: Where is the dairy located, Tim?

Tim: Central Florida. We're actually over between Fort Myers and Tampa, where all the elderly people go to pass away, you take a right and that's where we're at.

T3: When that hurricane came through Fort Myers last year, that affect you guys at all?

Tim: No, it affected a few of my buddies. Nobody lost any cows, but barns were just crinkled up like aluminum foil and tossed around. I think over the years I've lost three barns to hurricanes.

T3: Oh, really?

Tim: Yeah. They tell you how it's rated for 80 mile an hour or whatever, and then when the tornado or the hurricane comes through it wads it up like a piece of paper and chucks it 100 yards. You're like, "Well, that wasn't rated right." Anyway. Go ahead, this is your podcast.

T3: Tim, if you have a question to get the market discussion started, why don't you go ahead and shoot?

Today, we share Part 2 of a special two-part episode celebrating TC Jacoby & Co’s 75th anniversary. We’ll talk about the milk industry from the '90s to the dairy world of the future. Join Ted Jacoby II, Gus Jacoby, and Ted Jacoby III for the conclusion of our special 2-part episode as we discuss:

The first TC Jacoby & Co. cheese desk

Our projection for future growth in U.S. cheese exports

Our forecast for the future of the global dairy industry

We love the dairy industry and look forward to what the future will bring. So, raise your glass of milk, and let’s celebrate TC Jacoby’s 75 wonderful years in the U.S. dairy industry.

Intro audio (with music): Welcome to the Milk Check, a TC Jacoby & Co podcast where we share market insights and analysis with dairy farmers in mind.

Ted Jacoby III (T3): Hello, everyone, and welcome to The Milk Check. Today, we have a special edition of our monthly podcast because this year, 2024, TC Jacoby & Co celebrates 75 years of serving the dairy industry. In honor of this special anniversary, we are publishing a two-episode edition where, in the first part, my father, my brother Gus, and I discuss and – in my father's case – tell tales of the first 50 years of our history. In part two, we share the more recent 25 years as well as our thoughts on what the future of the industry may hold. Welcome to part two.

There are a lot of other things that were going on in the 90s. I mean, that all started in the 90s. We started our office in Mexico in the 90s. When I came to work for TC Jacoby & Co. in 1996, I spent about four or five months in St. Louis, and then I moved down to Mexico to help us start that office. That was quite the experience, living for a year in Mexico. Ironically, trying to move cheese to Mexico led me back to the States, and starting to sell it in the States. Eventually, I worked with risk management.

At the time, we were moving nonfat dry milk into Mexico. We had a company in Mexico then, so we were TC Jacoby & Co in the U.S. selling to TC Jacoby & Co in Mexico. We were warehousing the product in a warehouse in Mexico, selling whey powder, nonfat dry milk, and various other powders to multiple distributors in the area, but then also moving a little bit of cheese. I had one of my suppliers, the cheddar cheese, cancel on me, and so I was calling around looking for cheddar cheese, and another supplier said, “Not only do I have a load of cheddar for you to ship to Mexico, but I also have about 50 other loads of cheese. You should call the guy who canceled on you and see if he needs any extra.”

Next thing I know, I'm moving more cheese back and forth in the U.S. than I'm moving to Mexico. And that was when I called you and said, “Dad, I think I'm going to move back to the States, and I'm going to start up a cheese desk.” That was in 1997, and that's how we started trading cheese.

We went through the 50s, 60s, 70s, and 80s, and just about everything you, Uncle Bill, and Uncle Tom moved was mainly fluid. Then, in the 90s, we started moving powder. Bill, I think in the 80s, had begun moving powder and butter in the U.S.

Ted Jacoby II (T2): Billy used to move a lot of cream from California to the Midwest.

Gus Jacoby: Well, remember that was a big time for us because his development of California and the cost to move fluid product at that time was economically feasible in making cream and condensed products supplied by the California Central Valley and delivered on an annualized contractual basis to places as far as the upper Midwest and even into the Mideastern U.S. at time. Understanding the CDFA and the arbitrage between that and the Federal Orders was another thing we took advantage of for a few decades. So that was a big and successful time for us from a trading standpoint of fluid products.

T3: And then he was moving non-fat to many of the mozzarella guys in the Midwest when the mozzarella industry was in its infancy; that was when ...

A lot has changed in the dairy industry in the 75 years since Ted Jacoby, Sr. founded TC Jacoby & Company in 1949.

Today, we share Part 1 of a special two-part episode celebrating TC Jacoby & Co’s 75 wonderful years in the U.S. dairy industry. From picking up 10-gallon milk cans on the farm in the 40s to shipping internationally, we’ve come a long way. Join Ted Jacoby II, Gus Jacoby, and Ted Jacoby III for part 1 of a special 2-part episode as we discuss:

How tank trucks fundamentally changed the U.S. milk supply

Consolidation in the dairy industry

When computers came for milk

Plus, Ted Jacoby II shares his eyewitness account of the introduction of ultrafiltration (UF) milk. It all began with a coffee break.

Join us for a walk down the milk memory lane in our 75th-anniversary episode, Part 1: Dive into our history.

Ted Jacoby III (T3): Welcome and enjoy the show.

Episode Intro: Welcome to the Milk Check, a podcast from TC Jacob and Company, where we share market insights and analysis with dairy farmers in mind.

T3: Hello, everybody, and welcome to the Mouth Check. Today, we have a special edition of our monthly podcast because this year, 2024, TC Jacob and Company celebrates 75 years of servicing the dairy industry. In honor of this special anniversary, we are publishing a two-episode edition where, in the first part, my father, my brother Gus, and I discuss and, in my father's case, share tales of the first 50 years of our history. In part two, we share the more recent 25 years of our history and our thoughts on the future of this great industry we work in. Dad, I'll ask you: when Grandpa started the company in 1949, we still picked up milk in 10-gallon milk cans on the farm. So what was it like those first 10, 15 years of the company

Ted Jacoby II (T2): When my dad, your grandfather, got out of the Navy in 1945, I think he and two other fellas bought a dairy in Highland, Illinois, and you're right, they had milk coming into that dairy in cans. He and his partners operated that dairy for a couple of years. They sold the dairy to Midwest dairies. Midwest Dairies was then taken over by a company called City Corp. And City Corp, and Midwest Dairies had consolidated almost all the dairies in southern Illinois. All these dairies were consolidated, then spun off to Prairie Farms, and Fletcher Gorley took over Prairie Farms and turned them into one of the premier co-ops in the United States. After they sold the dairy, he booked office space in St. Louis on the ninth floor of what was the commerce building. So he would act as a broker of barrels of this and drums of that and set up shop as a middleman for mostly dairy ingredients.

There was a relationship that developed between us and Prairie Farms that has extended over all these years. We know each other quite well. The relationship has been strong for a long, long time. In the 40 years between the sixties and the nineties, pardon me, 30 years, you had several things occur. First of all, the consolidation people were picking up milk and bringing it to receiving stations, and then you could go from the receiving station to your regular market, or you could go somewhere else. There were receiving stations, called bump overs, which would consolidate the milk from many small farms and put it in a position to take it somewhere. You didn't have any dairies that shipped truckload quantities in the nineties in the Midwest. And then gradually, over that period of 30 years, you had large dairies that shipped truckload quantities, and that all occurred in the nineties and two thousand.

T3: Once those bulk tank trucks became common, when we started seeing milk move to the southeast in the fall when milk got tight,

T2: When tank trucks came in, it was about 1953 to 55, somewhere in that area, and the tank trucks were relatively small. 3,500 gallons was a big truck in those days, and when it became practical to move milk,

The 2024 ADPI/ABI Annual Conference starts next week and will likely move the dairy markets. What does Jacoby predict for dairy production and demand for 2024? Join Ted Jacoby III and our guests Jacob Menge, Vice President of Risk Management and Trade Strategy; Joshua White, Vice President of Dairy Ingredients; Diego Carvallo, Director of Dry Dairy Ingredient Trading; Gus Jacoby, President of Fluid Dairy Ingredients and Dairy Support; Joe Maixner, National Sales Manager of Dairy Ingredients; and Ted Jacoby Jr.

We discuss:

Jacoby’s predictions vs. results for 2024 YTD

Factors impacting prices for Q3 and Q4

Continued downward pressure on milk production and lackluster fluid milk demand

The impact of the Avian Flu on dairy production

Plus, is whey the new canary in the coal mine? Find out more on today's episode of The Milk Check.

Ted Jacoby III (T3): Hello, everybody, and welcome to the Milk Check. It's April 22nd, a week before the ADPI meeting in Chicago. And I thought this timing would be right for us to have a market discussion going into an annual conference that does have a tendency to be a bit of a market mover.

Today with me, I have Jacob Menge, our head of trading strategy and risk management, Joshua White, head of our dairy ingredients group, Diego Carvallo, our head trader for non-fat, dry milk and other dairy powders, Gus Jacoby, head of our... President of our fluid division, milk cream, UF milk. Joe Maixner, head of our butter trading, and my dad, of course, joining us to give his thoughts on these markets.

Welcome, everybody, and let's get to it. I was looking at our markets this morning, getting ready for this podcast and I kept asking myself the question, where did we think we'd be this week when we started the first week in January. And I don't think in any of our markets we really were thinking that we'd be dealing with what we're dealing with right now.

So, I think, maybe, what we'll do is we'll start with cheese. Jake, when we were entering the year, if I remember correctly, we were pretty bearish the cheese market, and if we were talking about what we thought the second quarter was going to bring in cheese, I didn't think it was a market that was going to be up 8 cents today and in the seventies, and probably, going higher over the rest of the week.

So, what do you think is going on in cheese, and compare and contrast what we thought would happen at the beginning of the year and what we're seeing right now?

Jacob Menge: I would say cheese has probably been the most in line with our expectations of all our commodities from where we started the year. We were bearish, and I would argue we saw that bearishness, right? I mean, we were in the 140s for a while in both blocks and barrels, and so, I think, yeah, we've seen a pretty good push the past week or two.

But otherwise, I think cheese, more or less, went in line with what we expected. Demand's been off a little bit. We've seen exports numbers are starting to look pretty good, but in general, sluggish has been what it's felt like for most of the year up until the past few weeks.

I'd say cheese kind of went along with what we expected, and it's been this cycle that we've seen for about a year now, right? We get a good push higher. Last year in July, we saw a pretty good push up into, I think, the upper 180s, and then, we seemed to kind of kill demand [inaudible 00:02:57] we've been getting to those levels. And then, we've fallen into the 130s, 140s, low 150s, that generates some more demand, and we yo-yo from there.

So, yeah, I wouldn't say anything too crazy from expectations on the cheese side.

Joshua White: You asked at the beginning of the year, would we have expected prices in our market conditions to be where they're at now on April 22nd? And I just did a quick look back right when you asked that, just to see what our commercial meeting notes and what our dialog and discussion are.

This is the first podcast episode in our quarterly Understanding Export series. Today's special guest is Fernando Anaya, Director General at DILAC. DILAC offers powdered dairy products and has a 27-year track record within the Mexican dairy industry. Our Jacoby team includes Ted Jacoby, President; Yara Morales, Director of Sales for Mexico and Latin America; and Diego Carvallo, Director of Dry Dairy Ingredient Trading at T.C. Jacoby and Company, Inc.

Today's episode discusses the Mexican consumer market for dairy products. Fernando shares his take on how drought, exchange rates, and political waves will affect Mexico's milk importers in 2024. How has the extreme drought in Mexico impacted domestic milk and cheese production and consumer demand?

Inflation has increased dairy prices, but could a strong peso offset this challenge for Mexican importers?

The Mexican government, one of the largest Mexican milk powder importers, announced that it will not import any milk powder this year. How will this big player impact the Mexican milk import market?

Mexican presidential elections take place this summer. Is this likely to affect milk imports?

This plus what importers should know about changes in milk import procedures and Fernando's opinion on the most important factor for milk imports in Mexico—dive in with us on today's Milk Check.

T3: Welcome to this month's episode of The Milk Check. I'm Ted Jacoby, president of T.C. Jacoby & Company. Today, we are joined by Yara Morales, sales director for Mexico and Latin America; Diego Carvallo, dairy ingredient trading director; and special guest Fernando Anaya, director general for DLAC. DLAC is a very good customer of ours in Mexico, and we're excited to have him. Fernando, welcome, and thank you for joining us today.

Fernando Anaya: Ted, thanks for the invitation. I'm really glad to be with you and your team.

T3: This episode will be released in Spanish and English, the first in our Understanding Export series, which we will publish quarterly. Today, my first question, Fernando, to you, is when we think about the Mexican dairy market and how much dairy Mexico imports, what is the number one thing exporters to Mexico must understand about the Mexican consumer? Obviously, one of them is price, but beyond price, what's important to the consumer in Mexico?

Fernando: Okay. Well, Ted, I think that's a really good question. Well, just to have a rough number of the imports into Mexico, I will say that 15% of our needs have to be imported every year, and that really is not changing a lot. I think that's the same number from maybe ten years into now.

So, what do the exporters have to be aware of to be in the Mexican market? The number one for sure will be price, the second will be price, and the third will be price. So that's something that I guess you can agree on that. Of course, Mexican customers will always look to have a better price, but again, it's not the only thing they are looking for. There are some things that the exporter has to be aware of, and one of them will be regulations. For the past two or three years, Mexico has been entering into new regulations.

For example, for non-fat, there's this new regulation, the NOM-222, and I know there have been a lot of challenges for the exporters because they must be sure they will be ready to fulfill this regulation. It's not that hard, but again, that's something that the exporters, mainly in the US, had to make some changes in their COAs, registering some labs to fulfill these regulations. So again, that's something that the exporters into Mexico must be aware of.

The other thing is logistics. The way that Mexican customers purchase mainly non-fat food is changing. Right now, the Mexicans are looking for the product to be available in the customs agent warehouses. Why? Because it's very quick to get the product into Mexico. Let's think maybe ten years ago,

Este es el primer episodio de nuestro serie trimestral Entendiendo Exportaciones. El invitado especial de hoy es Fernando Anaya, Director General en DILAC. DILAC ofrece productos lácteos en polvo y tiene un historial de 27 años dentro de la industria láctea mexicana. Nuestro equipo de Jacoby incluye a Ted Jacoby, Presidente; Yara Morales, Directora de Ventas para México y América Latina; y Diego Carvallo, Director de Comercio de Ingredientes Lácteos en T.C. Jacoby and Company, Inc.

En el episodio de hoy se discute el mercado consumidor mexicano de productos lácteos. Fernando comparte su perspectiva sobre cómo la sequía, los tipos de cambio y las corrientes políticas afectarán a los importadores de leche en México en 2024.

¿Cómo ha impactado la sequía extrema en México la producción nacional de leche y queso y la demanda del consumidor?

La inflación ha aumentado los precios lácteos, ¿pero podría un peso fuerte compensar este desafío para los importadores mexicanos? El gobierno mexicano, uno de los mayores importadores de leche en polvo de México, anunció que no importará leche en polvo este año. ¿Cómo afectará este gran jugador al mercado de importación de leche mexicana?

Las elecciones presidenciales mexicanas se llevarán a cabo este verano. ¿Es probable que esto afecte las importaciones de leche?

Además de lo anterior, lo que los importadores deben saber sobre los cambios en los procedimientos de importación de leche y la opinión de Fernando sobre el factor más importante para las importaciones de leche en México; sumérgete con nosotros en el Milk Check de hoy.

The T.C. Jacoby team got together to talk about a two-part phenomenon that we’re expecting to wrinkle the dairy markets over the course of the next year or two.

2023 through ’25, plant capacity expansions total 9% of all milk production. But heifers are short, milk production was flat in 2023 and we expect it to be flat (or close to it) in 2024. So who will be left out, short on milk? Or will dairies pull off a production miracle?

Director of Milk Marketing Greg Scheer, “Semi-retired member of the board” Don Street, Dairy Ingredients Vice President Josh White and Dairy Ingredients Sales Associate Tristan Suellentrop join Ted and his dad to speculate on how these issues will resolve over 2024 and 2025.

From high level discussions of price and premiums to granular conversation about regional dynamics and potential changes to the direction of milk flow in the U.S., the team covered a lot of ground in 20-ish minutes.

Give it a listen, and let us know what you think.

T3: Welcome everybody to this month's edition of The Milk Check. Today, I am joined by Greg Scheer, our director of milk marketing, Don Street, longtime dairy trader and industry veteran, Josh White, head of our whey and dairy ingredients group, my dad, another industry veteran, and then Tristan Suellentrop, who is part of Josh White's team and also part of our marketing.

So today we are going to try to answer a very interesting question, which is is the dairy industry about to embark on a very expensive game of musical chairs? Let me tell you what I'm thinking.

Two seemingly unrelated issues are starting to feed through the dairy industry. The first one is the fact that we've got a heifer supply shortage because since the pandemic, beef prices have been so strong that people have been breeding dairy cows to beef cows because the value of a beef calf has been a lot higher than the value of a dairy calf. This has created a heifer shortage where we just don't have enough heifers entering the milk supply right now, and it's going to be very, very difficult for the US dairy industry to expand milk production because we don't have the heifers to do so.

And think of it this way, if you make the decision today to breed to have a beef calf, you've got nine months of pregnancy, then you've got over two years of growth before that heifer can enter the milk supply, which means you have almost three years before you can change the dynamic that has already started. And everybody we're talking to today says dairy farmers, most of them, many of them are still breeding for beef calves and so this heifer supply shortage is not going away anytime soon. So that's one side of the coin.

On the other side of the coin, there is a lot of plant expansion going on right now. In fact so much that since the beginning of 2023 through 2025, that three year period, we are building enough additional plant capacity to equal about 9% of the total milk production in the United States. And given the fact that we're already done with 2023 and milk production was basically flat in 2023, it's hard for me to imagine, given the heifer shortage, that we're going to be able to increase milk production by 4.5% a year over the next two years. In fact, our experts, and we'll let them talk about it, are saying that we think '24 is going to be flat as well. So what's going to happen? All these new plants, how are we going to fill them? Where's the milk going to come from when we aren't going to have the additional cows to fill these plants?

I'll tell you what, Don, I'll start with you. What do you think is going to happen? How are we going to deal with this issue?

Don: First of all, one can always count on delays in plant construction so that the time arising gets pushed back a bit. It never fails, right? So maybe that takes a bit off of the leading edge, but it doesn't really answer the question.

I think if profitability is there for the dairy producers that you could ...

T3, Josh and Tristan sat down with Jeroen Lemmens, who joined Cefetra Dairy in Singapore after spending multiple years trading dairy in China.

We’d spent months looking for the right person to talk to about China’s dairy buying habits past, present and future. The conversation gave some color to the disappearance of Chinese demand for American milk and some backbone to the hope that some of that demand will return in 2024.

Discussion ranged from trade agreements with New Zealand and the state of the hog market to domestic macroeconomic factors like China’s property market and industrial challenges.

Give it a listen, and let us know what you think.

Ted: Our special guest today is Jeroen Lemmens from Cefetra. Jeroen lives in Singapore and handles the Asian operations for Cefetra. Jeroen, why don't we start by telling us a little bit about yourself?

Jeroen: I'm glad to be here. Thank you for the invitation. My name is Jeroen Lemmens. I have now been in dairy for, I think, close to 24 years. I worked in various trading firms in Holland, dealing mostly in Middle East, Eastern Europe, and Russia.

Then, about seven years ago, I went to China. I was active in the China operation, importer-distributor dealing in dairy commodities, dealing with the biggest dairy companies in China, both in food and feed. I think that was a very valuable experience. China has a dynamic all of its own. I think that's also showing in the market at this moment.

Also, during the dark times, the last few years during COVID, that was actually a very trying time. Then, early this year, I decided to leave the company I was working for and join Cefetra. For Cefetra now, setting up the operation in Singapore for Asia with, again, also a focus on China again.

Ted: Wonderful. China for the United States is a key dairy trade partner. Really, so much of what happens in China, all of Southeast Asia tends to follow that lead. A lot of times the dynamics tend to be very similar.

It's especially an important trade partner for the US when it comes to nonfat dry milk, and whey powder and whey derivatives. There's been a lot of talk lately about ... The import volumes in China are dropping, and, of course, in the US, our questions are always, "What does that mean for dairy prices in the US?"

I want to start with a very simple question, which is, from a dairy perspective, what is going on in China? What is driving the decrease in imports of dairy products? Is it across the whole spectrum of dairy products, or is it just certain dairy products? What are your expectations, going forward?

Jeroen: I think at the moment there's a lot of different things happening at the same time, all affecting the markets. I think a lot of buyers actually have been expecting that, with the reopening of China after COVID, there would be a boom in consumption. People were trying to take positions to be ready for this.

Actually the import values this year so far have been bigger than last year, year to date, whereas the consumption dropped away by a variety of reasons. One is local consumption took a hit, especially the consumption of, let's say, higher grade, fresh products. That consumption reduced a lot, so that's less consumption, more imports. That's one reason early in the year.

Second one is that the local production of milk powder in China actually continues to be strong. It has been very, very strong last few years, but it's still growing. You have growing local raw milk availability coupled with reasonable stocks and lowered amount, and I think that's dragging the market down now to a certain extent.

Then, looking at nonfat for US, you have the other situation that's starting this year. There will be no duty for New Zealand milk farmers, full year. Normally, there would only be a period in early Jan that the first 100,000 tons of product would be low duty. Now it's no duty, full year.

That means that the incentive for buyers to go to ...

Industry discussion surrounds a docket’s worth of changes to the Federal Milk Marketing Orders (FMMO), and we feel like it’s high time that we weighed in.

The USDA hearing on pricing formulas reconvened November 27, and the Jacoby team can’t help but feel that much of the hearings will amount to wasted or misplaced effort.

On this episode of The Milk Check, recorded in mid-November, a group from throughout the company discusses the potential changes that might help dairies with ongoing profitability problems. Then, they share their thoughts on the contents of the hearing so far.

T3: Hello everybody, and welcome to The Milk Check podcast. Today, we are going to tackle the famous, or maybe rather infamous, subject of federal order reform. I think you'll find listening to our discussion, that you'll find us a little bit more ambivalent about the process than maybe you'd expect from a group that is experts in marketing milk and the federal order system. But I'll let the conversation speak for itself, as we talk about the different things that the federal order hearing is trying to tackle and what we think should be done. And hopefully, it'll be helpful to everybody. I look forward to discussing it further, when they finally come out with their recommendations for how the federal order needs to be changed.

Dad, obviously, the federal order hearing is going on. And my suggestion is the reality is the path we're going down really isn't going to change a lot, and maybe that's what we should discuss is how some of these changes aren't going to have a big effect because the market is going to change to that. Things like, okay, they're going to change the make allowances. How much of an effect are changing the make allowances really going to have on the farmer's milk price?

Ted Jr: Zero.

T3: That's my point.

Ted Jr: The real issue is qualification and not the classified pricing system. Instead of having bottling plant A, for example, responsible for balancing, you now kick milk back to somebody else, usually a co-op who has a butter powder plant and you give them the responsibilities for balancing and then of course you pay for that with an overrated premium.

And the alternative would be, in my view at least, to weaken the minimum price requirements and do it in such a way, and I'm not sure you're going to get out of the box with something like this, but do it in such a way that you can transfer some of the balancing requirements back to the bottling plant so that they can run sales on milk so we can get some of our customers back. Something that promotes marketing and allows at least a portion of the balancing to be transferred to the plant, I think would be beneficial. Is that going to happen? No, they're not going to touch that With a 10-foot pole, the minimum price requirements are the key to qualification, and so that's where the thing meets the wall. In the meantime, our Class I sales continue to decline.

Anna: I think the biggest issue for me is that Class I is completely hamstrung by how everything is based off of their sales, their qualification, their everything else. It means that we've talked about them not being able to be innovative before, just how much it really sticks them in a certain spot where they can't do anything new. I don't really have a major problem with qualification. I think when you change those provisions, you end up devaluing the whole pool, which is kind of against the point, right? But my biggest issue is that we're basing all of this on Class I and quite frankly, they're not the most difficult customer anymore. Class III is in many cases way more difficult.

Gus: How is Class III more difficult? And I look at this knowingly from the standpoint that cheese plants tend to take a more consistent volume of milk and therefore they're an easier customer to serve. But why do you say that?

Anna: I don't think they're as easy as they used to be.