Milk in key exporting regions
%-change versus previous year
Europe
Fundamental oversupply situation sustains but sentiment improves somewhat
Although the fundamental oversupply situation is unchanged and spot milk prices remain as low as they have been since December, sentiment became a bit more positive as the supply peak is now behind us. Spot milk offers for further out – Q3 and beyond – are still EUR 0.10 below the current pay out prices to farmers though, so manufacturers do not seem to assume a material change to the supply side strength going forward. Spot milk prices are EUR 0.14-0.15 in Germany, EUR 0.10 in the Netherlands, EUR 0.07-0.08 in Belgium and EUR 0.07- 0.10 in France. SMC doubled in price in early May to EUR 1400-1500/t but the gap with SMP prices remains large enough to make commodity powder production highly profitable. Cream prices also increased from EUR 3/kg to EUR 4/kg despite the softness of the fat market.
Americas
Milk supply growth is expected to sustain
Although traditional supply cycles dictate that a period of strong milk production growth is eventually followed by a period of decline, it is questionable if we will see US supply strength weaken any time soon. Milk prices are strongly fueled by protein values in the current market and strong exports of cheese in particular are keeping the cheese market balanced and cheese prices range bound. Milk production growth remains at 2% or higher and farmers in the regions where new capacities are built are motivated to continue to invest in growth.
Asia-Pacific
Production conditions remain favorable in the shoulder of the season
New Zealand and Australia milk production becomes less relevant in the remainder of Q2 but supply growth in the shoulder months is significantly above last year’s level for both countries. More importantly, after an almost perfect season in terms of production conditions, volume terms and financial terms farmers are already looking forward to a strong start of the new season. Only adverse weather may be able to spoil the party when we get to September.
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