GLOBAL DAIRY DYNAMICS – October 1st 2021

Global Dairy Markets balance sheet

GLOBAL SUPPLY
AU: July milk production in Australia was weaker than expected to start the 2021-2022 milk season. However, industry sources suggest plentiful rain, good soil moisture levels and good pasture growth may help support an increase in Australian milk output for the upcoming months.
CN: There have been consistent increases in Chinese dairy production, and market commentators assess China’s growing dairy product inventory.
EU: Milk deliveries across Europe continue their seasonal decline. Besides the natural wind-down of the milking season, the high feed costs place financial pressures on farmers. In the first half of the year, dairy farmers have culled cows at a higher rate than in 2020. In addition, contacts suggest farmers are retiring without the next generation taking over the farm.
IN: Amul’s Milk procurement has increased by 171% in the last 11 years. Thus, the price paid to milk producers has also increased by 136%.
NZ: The New Zealand 2021-2022 milk season is still taking shape, but so far, so good, according to industry contacts. Adequate soil moisture and pasture growth are supportive of solid milk yields. Calving is nearing completion, and initial projections of milk output are favourable. Industry weather watchers are keeping an eye on the potential development of a La Nina event this year. This could lead to warmer, drier conditions in the lead up to the southern hemisphere summer.
UK: Arla has announced it will increase its October milk price by 0.32ppl on the back of increased prices for European dairy commodities
US: According to the National Oceanic and Atmospheric Administration, the US just suffered its hottest summer ever. Soaring temperatures weighed on milk yields and tightened supplies as heat stress accumulated late in the summer and into September.
GDT: During the 292nd event the index went up 1.0%, this was the third successive increase. WMP rose 2.2% to an average of US$3,777/t, with increases across all contracts. SMP grew 0.9% to average US$3,302/t. Fats saw a drop with butter losing 1.8% to average at US$4,857/t, with a drop recorded across all contracts. AMF trimmed 0.1% to average US$5,962/t with mixed contracts. Cheese plunged 1.2% to average US$4,274/t.

GLOBAL DEMAND
GDIP: Global price assessment (not a forecast) Oct: Butterfat $5,750, SNF $2,714 Nov: Butterfat $5,769, SNF $2,716 Dec: Butterfat $5,839, SNF $2,725 Jan: Butterfat $5,792, SNF $2,758
EU: Key destination for EU exports of cheeses from Jan.-July 2021: USA (+17%), Switzerland (+6%), Ukraine (+10%), Saudi Arabia (+5%), China (+71%), Australia (+5%) and Canada (+21%)
CN: China imports increased for all dairy categories in first 7 months of 2021: butter(oil) (+23%), cheese (+44%), SMP (+45%), WMP (+34%), wheypowder (+37%), casein(ate)s (+51%), condensed (+64%) and lactose (+10%);
MY: Malaysia looks to reduce milk imports through the ‘Dairy Valley’ project. Malaysia’s Johor State Government and the East Coast Economic Region Development Council (ECERDC) have signed a collaboration agreement to develop the Jemaluang Dairy Valley (JDV) project as part of the overall strategy in turning the East Coast Economic Region (ECER) into the ‘Dairy Valley’ of Malaysia.

Mail Cheese Producers 2017 -2021

Heard in the market

GEOPOLITICS / POLICIES / MACRO
– IN: India announces freight subsidy for dairy exports. The Directorate General of Foreign Trade (DGFT) has extended air freight assistance to exporters.

MERCHANT MARKET / WEATHER
CN: China’s August soybean imports from Brazil rise 10.9% y/y. China brought in 9.04 million tonnes of the oilseed from Brazil in August, up from 8.15 million tonnes a year earlier
US: The average milk price received by New York farmers in July 2021 was $18.10 per hundredweight, representing a 20 cent decrease from June 2021 and down 40 cents from July a year ago.
IN: Sugar exporters in India are holding off signing any more export contracts, in a bet that global prices will rally further after bad weather damaged crops in top grower Brazil.
UK: Arla has announced it will increase its October milk price by 0.32ppl on the back of increased prices for European dairy commodities.
IN: The Directorate General of Foreign Trade (DGFT) India to extend air freight assistance to the exporter of dairy products.
IQ: Iraq’s oil minister said OPEC and its allies are working to keep crude prices close to $70 per barrel as the global economy recovers, state news agency INA reported on Wednesday

CONSUMER / SUSTAINABILITY
AU: The government of Victoria in Australia has launched a US$41 million, 5-year research partnership with the dairy industry as part of its Transformational Agriculture Strategy. F1 hybrids and gene editing will be the focus in the forage programme, and new traits and improved selection in the animal programme. One of the results is expected to be Breeding more efficient cows
DK: Arla Foods will explore regenerative dairy farming practices on 24 pilot farms across UK, Sweden, Germany, Denmark, and the Netherlands to create data-driven proof points of their impact on nature and climate. At the same time, more than 900 organic Arla farmers will measure their soil carbon content and register practices that promote biodiversity.

Author Prashant Tripathi

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