Oil price not everything decisive for milk price

How close is the relationship between oil and milk prices?
"The connection is very clear. Most directly in the markets where oil plays a major role, especially in the Middle East. If the oil price falls, there is less money in the oil-exporting states to buy dairy, a relatively luxury consumption. import. 30% of global dairy trade is with oil states. If you add Russia, you get 35%. In these countries the interconnection with government programs is also strong. The government finances social programs that stimulate the consumption of healthy food, including dairy ."

Are Western European dairy companies that export a lot to the Middle East more dependent on the oil price than other dairy companies?
"Arla may be even more dependent in terms of direct turnover than FrieslandCampina. But the different parts and markets in the dairy trade always work as communicating vessels. If demand disappears somewhere, this will have an effect on the entire dairy portfolio. First of all in the tradable bulk dairy, but ultimately also influences the prices in the retail contracts."

Is there a difference in dairy segments? Is the price of skimmed milk powder more related to the price of petroleum than, for example, cheese?
"If there is an imbalance somewhere in the market, you will first see a price reaction with milk powder and butter (oil), so also in the case of the oil price effect. The other extreme concerns, for example, natural cheese in Western Europe, a product where the direct relationship with the oil price is less strong. But ultimately if you shut everything down and the law of communicating vessels comes into effect, the prices of natural cheese will also come under pressure."

Now that the oil price has fallen so much, a sharp drop in the farm milk price is inevitable, right?
"The oil price is not the all-determining factor, but one of the many factors that currently have a negative impact on milk value. I think it is still too early to express this in milk money."

"The dairy chain is currently under pressure due to the shift from out-of-home consumption to home consumption. Because this is happening at a time when European milk production is approaching the usual seasonal peak, it causes many problems in the chain. The closure of The catering industry makes less of a difference to sales volumes in Western Europe than in the rest of the world. The consumption of luxury dairy is shifting to home consumption."

"In Asia there is a much stronger negative relationship between dairy consumption and the catering ban. By definition, dairy consumption there mainly takes place outside the home. Some of these problems can be resolved when the market normalizes again in the coming weeks and months."

Otherwise the big blow will come in the second half of the year?
"Let's hope that the dairy market normalizes again quickly. The higher unemployment rises and the longer the low oil price lasts, the lower the farm milk price will be, on average over the year 2020. When we look back on 2020, I think the damage will be due to the current corona-related problems will be relatively small compared to the damage from the economic recession that is likely to follow."