Inside: Dairy Market
Dairy market is heading in a new direction
The prices for skimmed milk powder (SMP) are rising again and the dairy market has therefore embarked on a new path. There is still more than enough milk available, as the figures for the months of February and March prove. However, now demand is starting to take over.
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In the European Union (EU), the United States (US) and, icing on the cake, New Zealand, prices for skimmed milk powder rose. The Chicago stock exchange even saw the largest volume of Nonfat Dry Milk (NDM) traded since July 2017. In the EU, the positive trend break was expressed in a different way. For example, 24.066 tons of SMP were sold from intervention and there even turned out to be a bid of €1.705 per ton.
Milk powder stocks are shrinking
If this trend continues, the EU could be rid of its stockpile within 16 months. This gives the market room to spread its wings. The last international dairy auction of the Global Dairy Trade (GDT) also proved that there is potential. Here the average price increased by no less than 3,6%. If that price is passed on to the Chicago stock exchange, there is room for higher prices. The gap between the price from Arla and Fonterra shrank a little during the last GDT, but is still at $235 per tonne.
1,3
procent
The pluses in the price of the troubled protein are due to an increasing demand. What may also have provided relief is the lower milk supply in March in parts of the US and the EU. Nevertheless, the US still achieved a plus of 1,3%. The most important milk-producing states therefore record stable livestock sizes. Lower production per cow in particular slows down supply; The Midwest (just like the EU) had a capricious spring.
Both the US and the EU still manage to produce more tonnes compared to the previous year. However, the gains decrease every month and the lead shrinks. For example, the US delivered 373.310 more tons of milk until March, compared to 2017. While the EU produced 740.000 more tons of milk until February. This compares to 130.000 tonnes less milk in New Zealand over the first 3 months of the year.
New Zealand is recovering
In New Zealand the season is starting to end, but the backlog in milk supply is also decreasing. It gives reason for sentiment, but this time the market is not giving in yet. It looks like demand is flexing its muscles. It was also good news for the EU that agreements have been made with Japan, Singapore en Mexico.
It is therefore possible that the market is in a reasonably comfortable position at a time when milk production in both the US and the EU is reaching a peak. Things could be better, but in any case it is much less negative than at the beginning of 2015. The coming weeks will show whether the market can maintain the new path it has taken.
More about the milk supply in the Milk&Feed trend report.