Inside: Dairy Market
Is China the safety net for dairy prices?
For the fourth month in a row, the demand for dairy from China remains good. For example, the country recorded higher imports in September. At the same time, New Zealand is also reporting more liters of milk, following the lead of the European Union (EU) and the United States (US). Is the demand from China sufficient to function as a safety net below the milk price?
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New Zealand had a bad start to milk production. An extremely wet spring slowed grass growth and resulted in fewer liters of milk. Around mid-October the tide has turned and it is possible to catch up. For the month of October, New Zealand milk supplies recorded a plus of 3%, while Fonterra had to make do with a plus of 2%.
0,3
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Maintain peak production
On October 26, milk production peaked at a daily production of 82 million liters. A season earlier that was 80 million liters. It will be exciting to see whether the New Zealanders will be able to realize their plans to maintain peak production over a longer period. For the current season, Fonterra recorded a plus of 0,3%,
The extra liters end up in a market where Fonterra is seeing its export volumes decline. It is the US and the EU that are achieving positive results. In the 12 months to September, the US recorded a plus of 11% and the EU recorded a plus of 5% over the same period. China and Latin America in particular are attracting dairy, but Asia, with a plus of 9%, should not be forgotten either. In September, China requested 34% more dairy, which resulted in an increase of 53.000 tonnes in volumes.
Can Global Dairy Trade handle more milk?
The Global Dairy Trade (GDT) turned red during the last auction of November. A minus of 3,4% put the average price at $2.970. Whole milk powder fell 2,7% to $2.778, with February having the lowest price at $2.756. This means that the price is moving further and further away from the magical limit of $3.000 per tonne.
The results of skimmed milk powder are even worse. On average, the loss is 6,5%, which gives a price of $1.701. Remarkably, Fonterra was even cheaper at $1.640 than the $1.660 paid for Arla EU. The price also drops below the Dutch quotation. Newcomer Polish Dairy sold no goods.
Historical figures show that November is a volatile month for whole milk powder; where the price can go in any direction. December usually delivers stable to higher prices. Under the influence of favorable trading conditions, prices for delivery in January and February usually increase again, but this season the last auction shows that the race is not over yet.
$1 = €0,8529
Whole milk powder drops 2,7% in value