The fundamentals underpinning the global market outlook continue to gradually improve as global milk supply slows and demand remains strong. This should keep prices relatively stable in the short-term. As for our recent outlook, the separate drivers of fat and protein values in Europe and Oceania have different implications for each of the respective commodities.
Minimal growth in EU milk output, the clearance of intervention stocks, and the surge in demand for SMP will continue to support protein prices, but the prospects for the European Spring hold the key to sustained recovery. Butterfat prices in Europe have stabilised but will also remain sensitive to availability.
Market sentiment has improved in the US with shrinking milk growth. Cheese markets have rallied with tighter cheddar availability and risks of a shift in product mix given the divergent returns to regulated milk classes.
Global risks remain mixed, but promising signs of easing tensions between the US and China will boost confidence should that promising spin actually lead to a removal of tit-for-tat tariffs.
Cheese
EU and US cheese markets have firmed with weather-impacted tighter milk supplies. The US market has enjoyed a recent rally due to shortages of cheddar, helped by better returns to other products that has shifted milk use.
Skim Milk Powder
Global SMP trade continued to surge in December as prices remained attractive, lifting 26.2%on the prior year comparable, bringing exports for the quarter 21% ahead of the previous period. This reflected strong exports NZ and the EU – and India, whose exports lifted to an all-time high (albeit a small quantity).
Butter
The butterfat market remains fragile, driven by the gradual weakening in EU prices, while increased NZ availability has come to the market as demand remains tentative. The tighter EU milk supply has not significantly curbed butter availability as superior returns for the butter/SMP has kept output stronger in major producers.
Whole Milk Powder
Increased NZ output with strong recovery in milk output has added to availability. This has kept prices lower through recent months prior to the GDT rally in the past 6 events. Prices have rallied past US$3,000/t for Oceania product, where they should hold with tightening NZ availability.
Whey
The imposition of Chinese tariffs has significantly affected the US market as export prospects slow. The market may gradually correct as supplies remains relatively tight. Shifts in shares in markets is occurring and will take some time to adjust. Meanwhile, WPC markets improve.
By Dustin Boughton, Procurement, Maxum Foods – Your partner in dairy.
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