The Milk Check

Experienced dairy traders discuss current market trends that affect payments to dairy farmers.

The Milk Check is a business podcast hosted by Unknown Host, with 18 episodes on record and a Required Pod Score of 80. PitchCentric scores this show on Booking Probability, Listen Score, and live audience signals refreshed every 24 hours.

Unknown Host hosts The Milk Check, a business show with 18 episodes published.

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  The Milk Check

  Can the U.S. Keep Its Dairy Export Advantage?

  Aug 5, 202643 min

  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.

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  The Milk Check

  The Perfect Storm for Milk Solids

  Jul 30, 202637 min

  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 diff

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  The Milk Check

  Who Wins the Next Decade of Milk Production?

  Jul 21, 202643 min

  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

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  The Milk Check

  Who Wins the Next Decade of Milk Production?

  Jul 21, 202643 minS0

  <p >The next decade of global dairy growth may look very different from the last one.</p> <p >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.</p> <p >But those regions are not growing the way they once did.</p> <p >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.</p> <p >In this episode of The Milk...

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  The Milk Check

  Screwworm, Bird Flu and Foot-and-Mouth Disease: Is U.S. Dairy Ready?

  Jul 9, 202631 min

  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&#8217;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 &#38; Co., your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I&#8217;m Ted Jacoby. Let&#8217;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&#8217;re excited to have you. Jamie Jonker: Thank you for having me here. I think we&#8217;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&#8217;s risk management team. Guys, thanks for joining us today. So the topic we&#8217;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&#8217;re getting questions about that. But we&#8217;ll start with the one that&#8217;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&#8217;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&#8217;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&#8217;s happened is starting in &#8217;23, it started creeping back up through Central America through the movement of people and people moving with their animals. Got into Mexico in &#8217;24. Started really taking off in Mexico in &#8217;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&#8217;t have to be a large gash on an animal. It&#8217;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&#8217;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&#8217;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&#8217;re finding domestic animals in Texas that have it. It&#8217;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&#8217;s likely a reproducing fly population there, and so there&#8217;s a higher risk for other animals in that location. There&#8217;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&#8217;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&#8217;re not lactating. There&#8217;s only one product that&#8217;s approved for prevention in lactating dairy cattle at this point in time. That&#8217;s DECTOMAX. It&#8217;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&#8217;s beef cattle, for at least 30 days they couldn&#8217;t be sold to a slaughterhouse, correct? Jamie Jonker: That&#8217;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&#8217;re using other products, the withdrawal period is unknown; you&#8217;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&#8217;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&#8217;t need to recreate things that are done well, so we have links to other resources. We&#8217;re also keeping a keen eye on what&#8217;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&#8217;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&#8217;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&#8217;s the response to that individual animal, it&#8217;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&#8217;s called the infested zone. There&#8217;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&#8217;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&#8217;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&#8217;s inspection of the animals to ensure that they don&#8217;t have any infestations. Depending upon where they&#8217;re moving, there could be requirements for prevention treatment. That&#8217;s not necessarily that it happens 100% of the time. If they&#8217;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&#8217;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&#8217;re not doing additional treatments of animals in the herd, if the determination is you&#8217;ve got an isolated case and you don&#8217;t need to do a broader prevention process, that milk from all those other animals continues to flow. You wanna make sure that you&#8217;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&#8217;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&#8217;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&#8217;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&#8217;re experiencing throughout a lot of parts of the U.S. right now. It&#8217;s very cold intolerant, and if you get three or four days at twenty degrees Fahrenheit, that kills most of the flies, so that&#8217;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&#8217;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&#8217;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&#8217;s fully operational . You&#8217;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&#8217;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&#8217;s a realization that this is gonna be a multi-year process, and that it&#8217;s unlikely that it&#8217;s just gonna stay in a geography near the border. So, long way of saying, yes, I think it&#8217;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&#8217;t think so. I think that it&#8217;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&#8217;s not gonna be material in terms of how many dairies in the U.S. it&#8217;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&#8217;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&#8217;s not the case. When you are milking cows every day, and bottle-feeding calves, and checking on your heifers, that&#8217;s a very hour-to-hour interaction with your livestock, and so it&#8217;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 &#8217;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&#8217;m not focused on milk production at this point at all. I&#8217;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&#8217;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&#8217;s impacted us is we typically take hundreds of thousands and slightly over a million Mexican feeder cattle. So, that&#8217;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, &#8220;All right, they&#8217;ll get this under control, and we&#8217;ll reopen the border, and those feeder cattle imports, we&#8217;ll be able to bring them in again.&#8221; The border is shut, and it doesn&#8217;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&#8217;s beef on dairy calves. At times when we have extra heifers, which is not right now, we&#8217;ll just place true dairy animals in feedlots. The price might incentivize us to consider that, although right now they&#8217;re so valuable as dairy animals, that&#8217;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&#8217;s just an unheard-of price in the past, and it is really adding up to a lot for dairy producers&#8217; bottom lines. For several days here, we were looking at $15, $16 milk and $4.30 corn, and the math wasn&#8217;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 pro

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