The 4 most important developments in milk

The most important development for the global market is that the milk puddle still growing. The most recent supply figures from New Zealand underline this. Yet it is not these regions that need to be monitored. "Growth in the United States (US) is not going to continue. The states where the milk supply is growing, is experiencing drought. As a result, the price of alfalfa has skyrocketed. It puts pressure on margins."

Plays in New Zealand mycoplasma bovis a role. "The country slaughters an average of 1 million cows; the 150.000 animals that are slaughtered due to the animal disease are therefore a drop in the ocean. However, this is probably not the end of the story. Because what are they going to do next?" More moderate growth is also seen in the European Union (EU). 

"A growth of 1 million tons of milk per year is not a problem for the market, but more milk will be difficult. The 'wild card' goes to South America." Ledman indicates that there are signals for 2019 that (if the weather is good) a lot of milk will be produced in that region. So you have to pay attention to what happens there.

Trade disputes
From the growth in South America it is only a small step to the trade conflicts, of which Mexico is a part. This is how the country is threatened the import tariffs of dairy from the US. The question, however, is whether Europe will benefit from this, or whether this will become Canada. That country is closer and certainly has something to offer, says Ledman.

Another country with which the US is on less good terms is China. The US has a large share of whey in this market. The dangers of these conflicts are already impacting the Chicago Stock Exchange; there the various prices of dairy products turn red. However, the lower prices can make US products interesting for other regions and thus further change the global playing field.

Milk powder and drinking milk
China and the US are therefore at odds with each other in trade, but China also has an advantage other players what's in store; for example, they want to ban milk powder from drinking milk. Ledman indicates that this could have consequences for global trade, because the majority of dairy exports consist of milk powder. 

"The idea behind that is that they want to help the domestic price and that they offer a fresher and more reliable product. At the moment the country is 58% self-sufficient." This means that imports of UHT milk, which Europe is mainly concerned with, will increase. "The US is not yet an important player here and New Zealand will have to make some additional efforts if they want to respond to this."

Ledman also discusses expectations for milk supply in China: "In 2015, supply rose to a peak. Since then, it has fallen by 5 million US pounds, due to the hot summers. It is estimated that this decline will not continue this year because a summer bonus has given dairy farmers the space to invest in ventilation." This means that 2018 gives a hint of the trend in supply further afield.

butter bubble
The development that still concerns people the most is the butter bubble. "Everyone looks at butter, but it is actually cheese that needs to be monitored. Cheese removes a lot of fat from the butter. The scale of cheese processing has increased considerably (due to the construction of factories); mention, for example, the factory of A-ware.”

"It is expected that this will amount to a total of 50 million pounds per day (including other processors). Regardless of demand and what prices do, that cheese will be produced anyway." Because cheese production will not change, fat will remain tight and thus the butter bubble will be maintained.

These are the most important developments, because there is more going on. For example, the abolition of the '1 child policy' in China has not brought the expected baby boom, but hope has not yet disappeared. Then there is also the rapidly growing demand in India, what will this do for the market?? The market currently has a fragile balance, but there are as many opportunities as threats ahead. This leaves the volatility in prices only increase.