Global milk supplies are flat to tightening, providing support to prices, but demand weakness for ingredients in domestic and export markets prevents market pricing from moving dramatically higher.
Regional dynamics are causing some pricing disconnections – which are greatest in cheese and fats, while protein values are more aligned across regions.
The EU milk balance is tightening as lower output and priority for cheese is reducing availability of commodities. Cream prices have gone to extremes in the run-up to the festive season, which is also tightening butter stocks.
Affordability at these prices will be tested post-festivities with weaker consumer spending, but spring is the key to any major change on the supply side. Producers are getting plenty of encouragement to increase output.
SMP availability has reduced sharply in the EU and US, but the Oceania market holds the key to price action in the short-term, with increased availability and weak export demand.
NZ is still in a delicate balance – WMP demand from China remains sluggish, and cheese competition is fierce which could push more milk towards SMP.
There are few meaningful signs that China’s internal milk balance is tightening, although demand is recovering in fluid milk markets. Demand from other major export markets is mixed, but SE Asia remains the major missing piece. Opportunistic buying regions have taken advantage of low commodity prices to restock.
The US market will remain mixed as milk output stays close to flat YOY through coming months. Cheese balance remains the focal point with slowing demand as new capacity has mostly been filled. Firming EU prices could mean greater opportunity to channel into exports. SMP remains under the heavy influence of the global market, while fats have, as expected, corrected to meet domestic demand.
By Edwin Lloyd, Executive General Manager – Foods
Ph: +61 7 3246 7810
Graph Reference: Fresh Agenda
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