The global milk balance will remain tight as milk production will slowly expand from here, while strong trade demand has tightened milk powder stocks. The tight market won’t necessarily bring firming prices across the board –the implications for each commodity by region differ depending on local balance sheets and demand-side capacity, which includes economic effects. That will significantly change if a hot and dry European summer is followed by a failed NZ spring.

We also need to consider the wider political and trade risks such as the escalation of the US-China trade dispute, increased chances of a no-deal Brexit outcome, and the political and economic challenges for Algeria. These will threaten dairy market stability through 2019.

global-dairy-commodity-update

Skim Milk Powder

EU prices gradually firming with slow growth in output and lower stocks. Sustained premiums for NZ SMP over EU and US product. Growth in export trade has been strong at attractive prices, driven by SE Asia, Mexico and China.

Whole Milk Powder

Weak finish to NZ season with reduced availability. Strong growth in Chinese demand has tightened the NZ balance sheet tight. Prices weaker as buying activities slow. Reduced availability from Latam.

Butter

EU market weaker with adequate availability and some weak demand signals. NZ prices driven higher by GDT management, weakening with pushback at high prices. Patchy growth in global trade, highly conditional on affordability in developing regions. US market firm with improving demand and tighter supply.

Cheese

Global cheese trade increased 4.4% in March, the slowest expansion this year. Steady EU prices with good domestic demand but slower exports. Higher production in EU filling new plant capacity. US market has lost some ground despite reportedly tighter cheddar supply. Improved North Asian demand.

Whey

Weak commodity whey prices due to tariffs on US product and culling of Chinese and nearby pig herds. US market remains weak with poor demand prospects. Improving WPC-80 markets as stocks ease. The complex effects of African Swine Fever (ASF) will continue to unfold well beyond the impact on commodity whey prices.

By Dustin Boughton, Procurement, Maxum Foods – Your partner in dairy