GLOBAL DAIRY DYNAMICS – JULY 2021

Global Supply

Globally, milk output from the four largest exporters — New Zealand, the United States, the European Union plus the UK, and Australia — has been steadily increasing. Growth rates have ranged between one per cent and two per cent for much of the past year. Spring flush in certain parts of the US has been higher than previous averages and has lasted longer.

EU: The European milk collection decreased in January-April 2021 by 0.7%. Ireland (+6.1%), Italy (+3.5%) and Poland (+1.9%) showed the highest production growth while Germany (-0.7%), Netherlands (-0.8%) and Finland (-3.1%) were the top three countries with milk collection decline.

US: The US milk production in April 2021 was +3.3% and +1.6% in January-April 2021 due to a decrease in February. Milk remains plentiful in the Midwest despite temperatures hitting the 30+ °C mark. The Class III milk price tumbles more than $1.60 due to the strong supply.

NZ: The New Zealand milk production at the end of its production cycle saw a +11.7% growth YoY. in April 2021 (11th month of the 2020/21 season) was +11.7%.

AU: The Australian milk production in April 2021 was 0.6% higher than in April 2020. The cumulative growth of production after ten months was +0.9%

IN: India is slowly inching toward its peak milk production season. Given the bumper crop harvest and a suitable monsoon, the country is expected to cross the 200 MMT production mark in 2021.

Global Demand:

Global demand for ingredients has absorbed increased production from additional fluid milk availability at the plants. However, there may be unutilised fluid milk in certain parts of the supply chain.

CN: Greater China (China, Macau and Hong Kong) remains the key driver of this. The Chinese imports increased by 12% for butter/butteroil, +36% for SMP, +17% for WMP, +62% whey powder and +51% for cheese.

JP: In Jan-April Japanese cheese imports were 2% higher than 2020 levels, but butter/butter oil and SMP imports were lower by 15% and 43%. By April 2021, Russia increased imports of cheeses by 18% and Chile by 82% (45% EU origin).

Feed Price: 
Despite weakness in month over month, the soy prices are still near their all-time highs. With the tight feed supplies until this year’s harvest season, feed costs will likely remain high and volatile as they have been throughout the year so far.
The global soy production is 6% high YoY that can create some respite in the prices, but Latin America experiencing frost could create challenges for the corn supply, further tightening the market.

$$: 
Strengthening USD and sky-high commodity prices can act as a deterrent for smaller developing nations, which can defer the procurements for the later part of the year.

Author Prashant Tripathi

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