Today’s Global Trade Auction saw the average price drop by 2.2% but what is actually going on at UK, EU and world markets? See below an overview of the current situation on milk volumes and on farmgate and commodity prices.
UK
With April being this year’s peak, supply has started to recede into May and we’ve seen the whole milk spot price lifting to around 15ppl-17ppl delivered.
Skimmed milk prices have in turn increased to 5ppl-7ppl after a 4ppl floor a few weeks ago. There is concern though on the impact of the upcoming bank holiday and half term on prices.
Cream prices have increased to around 86-87p/kg though no change in demand or supply has been seen so the market remains balanced. Butter prices have also increased by £20/t -£40/t taking salted to £2,050 - £2,150 per tonne and unsalted to £2,120 - £2,150 per tonne.
Skimmed milk powder is stable at £1,250/t (even with falls on the Continent) and whey is stable at £670 a tonne.
Cheddar is a different story with mild dropping £50/t to £2,250- £2,300 tonne in an attempt to attract buyers away from competitively priced imports.
Mature is stable at £3,300/t to £3,350/ tonne.
Ireland
As expected, in the first month post quota milk production in Ireland has increased by around 10% compared with last year. All Irish co-ops paid exactly the same price for February milk as for the month before, and all have agreed to hold their price for March. In February, Aurivo paid the highest price of 30.2 euro cents and Kerry the lowest at 28.4 euro cents.
EU
European milk production is now about average for this time of year, with only a few countries showing significant growth (eg Ireland).
Levels have been just below 2014 with March volumes 1.8% down. The Commission is predicting 1% growth this milk year with low prices hitting production hard.
For some EU member states the past year has seen the most dramatic fall in farmgate prices ever recorded.
Worst hit were the Baltic States with prices in Estonia (-38%), Lithuania (-36%) and Latvia (-36%) now a long way below other EU member states at or below 25 €c/kg. At the top of the table are Cyprus (57.29c), Malta (45.4c), Greece (42.15c), Finland (36.5c) and Italy (35.5c)
On dairy commodities the market has seen further falls with many products approaching floor levels as a result of slow demand and strong production.
Butter prices continue to decline falling by €50 - €70 to reach €3,0202 per tonne for Dutch product. SMP has been stable after a 7% decline last month, falling by €50 per tonne for food and feed uses. SMP production is being favoured over other commodities, further increasing supplies.
The story in the whole milk powder market is similar (trading at around €2,400 per tonne) with product from Oceania of better value. Whey prices have fallen marginally due to increased availability from active cheese production and constrained exports due to competition from US product.
In January and February 2015, EU cheese exports were down 17% and WMP exports down 10%. Most exports have been on a downward trend but SMP exports were up 24%. The US was the biggest outlet for cheese, with a 17% increase on last year, followed by Japan (+62%), Switzerland, South Korea and Saudi Arabia
And on superlevy, eight member states – Germany, the Netherlands, Poland, Denmark, Austria, Ireland, Cyprus and Luxembourg – exceeded their milk quotas last year and will have to pay €408m in super-levy.
Global news
In New Zealand milk production is slowly declining as is the seasonal norm – after a 5.7% fall in production in February, March production was down 0.9%.
Good rainfall has helped production recover to near average levels after the falls we saw in February.
Butter and SMP prices have fallen making them more attractive to export. WMP from Oceania is the most competitive on the world market and prices have fallen again after an 11% drop last month. Supplies are building up but demand continues to be weak.
Australian production is strong though is likely to fall with expected cold and wet weather due until July.
In the US production is increasing in most regions with March volumes up 1.2% on last year.
Exports are declining as a result of strong domestic demand with cheese and butter down 16% and 72% respectively because of uncompetitive pricing. Strong butter production is being met by good demand.
Cheese production is also robust with many plants operating at capacity. SMP production is increasing with stocks building up while buyers are hesitant about covering more than their short term needs.
And a final note on China
Chinese milk powder imports in March were the lowest for nearly 5 years. Chinese WMP imports in March were down 67% compared to last year at 36,300 tonnes and all imports were down 50% on the year. Chinese imports of SMP in March were down 47% at 15,500 tonnes.
Flagging Chinese import demand is cancelling out declining worldwide milk production. The Chinese share of WMP from NZ in the first quarter of this year increased from 91% last year to 99% this year while the Chinese share of imports of SMP from New Zealand increased from 54% to 78%. Chinese imports of whey, lactose and cheese were up.
On a more positive note, China has announced plans for reducing customs duties for imported, finished goods, good news for UHT exporters such as the UK and Northern Europe and cheese producers.
Also in 2014 over 70% of China’s infant formula milk powder imports came from the EU and this is expected to increase in 2015. Chinese imports of liquid milk from the EU were up 59% in 2014 (to 295,000) tonnes and are expected to increase to 400,000 tonnes this year.