Global Dairy Markets balance sheet

Global Supply
AU: Much of Australia started the 2020-2021 milk production season with adequate rainfall and good pasture conditions. In addition, meteorologists are forecasting above-average rainfall and warm temperatures for the next few months. Dairy farmers have plenty of forages on hand, and feed costs have been under control. The only challenge faced by the industry is shipping delays and port congestion that have hampered some dairy export opportunities.
CN: China’s milk production is forecast to reach 34.6 MMT in 2021, benefiting from high raw milk prices and continued investment by large milk producers.
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 2020. In addition, contacts suggest farmers are retiring without the next generation taking over the farm. EU milk collection in the first half of 2021 remained at the same level as in the same period of 2020 (+0.5% with leap year correction). In June, IT (+4%, + 42 000 t), IE (+3.7%, +39 000t), FR (+0.8%, +16 000 t), PL (+0.7%, 8 000 t) and HU (+5.2%, +7000t), were with the highest production growth in volume while 8 countries reported reductions, including DE (-1.3%, -36000 t) and FI (-4.5%, -9 000 t).
NZ: The New Zealand milk production season is starting off strong. Much of the calving is wrapping up on the North Island, and the South Island is only a few weeks behind. Preliminary milk volumes are on target. Pasture growth rates are at normal levels, aided by plentiful rains through the winter months. Weather forecasts predict a drier and warmer spring. Dairy farmers expect this will aid in good pasture growth, assuming that adequate soil moisture can be maintained.
UK: UK milk production during January-June 2021 has increased 0.9% versus January-June 2020.
US: For 2021, the USDA forecasts milk production at 114 MMT, down 50 Thousand Tonnes from last month’s estimate. If realized, 2021 production would be up about 2.2% from 2020.

Global Demand
– Farmgate milk prices are high across much of the world, but producers are struggling with rising input costs and downside risks in milk prices. A slowdown in import demand from China is expected to begin, with the potential to impact global dairy commodity prices.
GDIP: Global price assessment (not a forecast) Oct: Butterfat $5,723, SNF $2,690 Nov: Butterfat $5,756, SNF $2,688 Dec: Butterfat $5,800, SNF $2,699
AU: According to Dairy Australia, from July 2020 to June 2021, milk exports from Australia were 280,224 MT, which is 14.8% higher from July 2019 – June 2020. The top destinations for AU milk were China, Singapore and Malaysia.

EU and NZ Export volumes Jan – June 2021

NZ: milk production – 15 years seasonality

g-DIP

g-DIP (global Dairy ingredient price assessment) is the result of countless discussions across 5 continents over the past 5 years to assign a Spot and Forward assessment to the value of dairy ingredients. In its current form, the assessment includes a Spot and 3-month Forward value for both global Butterfat and Nonfat Solids, published biweekly. The assessments are available for everyone, at no cost.
The assessments aim to:
-> Inform dairy commodity negotiations in origin and destination markets and global trade.
-> Surface ingredient value from observed commodity prices, traded and reported, and an anticipated global trade balance
(www.globalmilk.net)

Heard in the market

GEOPOLITICS / POLICIES / MACRO

  • US:
    – Sec. Vilsack announced that a $700 million competitive grant funding would be available through the new Farm and Food Workers Relief (FFWR) grant program to help farmworkers and meatpacking workers with pandemic-related health and safety costs.
    – USMCA hearing focused on dairy, naming discrepancies. For the dairy industry in the U.S., 40% of the export of products was destined for Mexico and Canada. Therefore, it is essential to know firsthand what impact the USMCA will have on milk producers in the United States. Naming discrepancies cause delays and confusion between the shipper and receiver of the products.
    – Saputo Inc., on Sept. 1, completed the acquisition of the Carolina Aseptic and Carolina Dairy businesses formerly operated by AmeriQual Group Holdings LLC, including two buildings in North Carolina.
  • World
    FrieslandCampina CEO Schumacher is the new Global Dairy Platform chair
  • ID
    Indonesia Ministry of Agriculture (MOA) has issued a new regulation requiring Import Recommendations for soybeans. However, an implementation may depend on corresponding regulations from the Ministry of Trade (MOT).
  • UK
    Farmers in England will be able to spread slurry or manure in autumn, providing there is no pollution risk, following the Environment Agency’s decision to relax enforcement rules until the end of February 2022.
  • IN
    India will launch a 110 billion rupee ($1.48 billion) plan to boost domestic oilseed production to make the country self-sufficient in edible oil. Prime Minister Narendra Modi said the move would cut costly vegetable oil imports.

MERCHANT MARKET / WEATHER

  • EU
    A record run in energy prices that pushed European electricity costs to multi-year highs is unlikely to ease off before year-end, pointing to an expensive winter heating season for consumers.
  • World: 
    With concerns over tightening wheat supply across major producers, end products such as bread and pasta in importing nations are becoming costlier. Apart from a likely decline in supply, export regulations imposed by countries like Russia and Belarus also support wheat prices.

CONSUMER / SUSTAINABILITY

  • IN
    Dairy analogues or plant-based beverages portrayed as dairy products create unhealthy price competition for the dairy industry, said Meenesh Shah, Chairman, NDDB
  • AU
    – A former engineer from Western Australia now milks wild camels for a living in a move that he concedes is unexpected, but lucrative. CEO of camel milk company Good Earth Dairy, Marcel Steingiesser, says the business has turned over $250,000 in the last 12 months from the unique idea.
    – Dairy farmers in north-east Victoria are leading an industry response to climate change — identifying changing rainfall patterns, increased temperatures, availability of water, weather extremes and access to health services as challenges and/or opportunities for the next decade.
  • NZ
    – NZ dairy farm Happy cow milk reaches a $ 500,000 fundraising target for ethical dairy business
    – The IPCC’s Sixth Assessment Report (AR6) summarises the latest climate change science worldwide. It outlines recommendations that more must be done to limit warming to 1.5 degrees Celsius to meet the global target. The report endorses New Zealand’s split gas approach, which recognises the difference between biogenic methane and long-lived gases and that biogenic methane does not need to be reduced to net zero. It recognizes that New Zealand showed leadership in its split gas approach.
  • US
    California’s dairy industry is one step closer to achieving net-zero emissions by 2050. Trinkler Dairy Farm was selected as the first site for a pilot program to test novel methane-cutting technologies.

Author Prashant Tripathi

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