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Dairy Commodities Market Dynamics - Q1 2021

Dairy commodity prices in 2020 did not find much stability over an extended period and kept buyers pondering the best time to purchase. In hindsight, we can say that from the buyers perspective, the best decisions for SMP purchases from Europe were taken in April, post which the price tide reversed and continued to move up.

While prices saw a very sharp decline in a short span at the start of the pandemic in end Q1 / early Q2 2020, we saw the prices surge back up after the steep fall until the year end. The average prices for 2020 however were lower than those in January 2020 for these products.

The reasons that can be cited for the increase include: No intervention stocks in Europe, strengthening of Euro against USD, increased demands of certain products from Europe due to non-availability from Oceania and an increased demand from large economies like China, as they opened again for imports.

SMP: For the period Jan-Nov 2020, the EU 28 saw an increase of approx. 41,000 MT over LY for the same period for 2019. The EU 28 produced over 1,414k MT of SMP in the first eleven months of 2020 as compared to 1,373k MT for the same period of 2019.For the period Jan-Nov 2020, Germany emerged as the largest producer out of Europe with 377k MT followed by France with 370k MT and Poland a distant third with 151k MT. These three countries contribute to app. 63.5% of the total SMP produced in EU – 28 for the period of Jan-Nov (total production being 1,414k MT). Germany, Ireland and Netherlands saw an increase in their production over 2019 with a positive contribution if 15,500; 14,500 and 4,000 MT respectively. France and Denmark on the other hand saw a drop of 8,800 MT and 4,000 MT respectively as against 2019 volumes of SMP produced.

SMP prices from Germany averaged out to 2,241 Euro / MT FOB for the year 2020. This is higher than the average price of 2,154 Euro / MT FOB for the year 2019. After starting at levels of 2,625 Euro in Jan 2020, the prices saw a steep decline with the lowest price of 1,980 Euro / MT recorded in April, 2020. After this the prices saw a continuous increase and the trend continues into 2021 with prices averaging at 2,350 Euro / MT FOB as of mid-Feb 2021.

Dairy Commodities Market Dynamics

SMP from Oceania recorded an average price of 2,447 Euro / MT FOB for the year 2020, as against 2,345 Euro / MT FOB for the year 2019. However, the prices from Oceania also followed the downward trend as seen in Germany where the prices slipped to their lowest level of 2,306 Euro / MT FOB in the month

of June 2020 after starting at an average level of 2,724 Euro / MT FOB in Jan. 2020. Post June, the prices have been following an upward trend and the average mid-Feb price from Oceania stands at 2,640 Euro / MT FOB.

SMP prices from USA averaged at 2,050 Euro / MT FOB for the year 2020 as against an average of 2,086 Euro / MT FOB for 2019. They recorded their lowest price in April 2020 at 1,800 Euro / MT FOB, a steep fall from 2,460 Euro / MT FOB recoded in Feb 2020 due to the impact of the pandemic.

The strengthening of the Euro and increased demand from China have been the driving factors for the rising SMP prices from Europe. Due to increased demand, we are also seeing almost no availability for Q1 and limited stock availability for the first half of Q2. With the increased demands, the prices are expected to remain firm for rest of Q1 and early Q2.

The average price of SMP from Germany as of mid Feb. 2021 stands at 2,350 Euro/MT FOB as against 2,100 Euro / MT FOB from US and 2,640 Euro / MT FOB from Oceania.

WMP: The WMP volumes from Europe for 2020 were similar to volumes produced in 2019. Europe shipped approx. 736,000 MT of WMP in 2020, with Germany leading followed by the Netherlands and France.

Germany was the largest contributor LY like in 2019, accounting for approx. 33% of total EU WMP production, a contribution of app. 246 MT for the period of Jan-Dec 2020. The Netherlands maintained its second position in 2020 like 2019, with a contribution of 178k MT followed by France with a 118k MT production of WMP for the period of Jan-Dec 2020.

The average price for WMP for the year 2020 tallied to approx. 2,820 Euro / MT FOB from Germany as against an average of 2,940 Euro / MT FOB for 2019. Just like SMP, the WMP average prices were lower than the starting price of 3,075 Euro / MT FOB in Jan 2020.

The lowest price for WMP from Germany for this year was recorded in the month of May with an average of 2,615 Euro / MT FOB.

Dairy Commodities Market Dynamics

WMP prices from Oceania averaged at 2,600 Euro / MT for the year 2020, as against 2,800 Euro / MT FOB for the year 2019. However, the WMP prices from Oceania averaged at a higher rate for the year against their starting price of 2,580 Euro / MT FOB in Jan. 2020. The lowest price for WMP from Oceania for this year were recorded in the month of May with an average of 2,477 Euro / MT FOB.

WMP prices from US averaged at 3,285 Euro / MT FOB for the year 2020 as against 3,330 Euro / MT FOB for the year 2019. WMP prices from the US averaged at a lower rate for the year against their starting price of 3,580 Euro / MT FOB in Jan. 2020. The lowest price for WMP from US for this year recorded in the month of August at an average of 3,108 Euro / MT FOB.

The average price of WMP from Germany as of mid Feb. 2021 stands at 2,870 Euro / MT FOB as against 2,910 Euro / MT FOB from US and 2,780 Euro / MT FOB from Oceania.