Home > Industry News > Dairy Ingredients Industry News > DAIRY COMMODITIES MARKET INTELLIGENCE - Q1 2023
Increased culling in the US, unfavorable weather conditions in New Zealand, Brazil, Argentina and lower milk prices in the EU will all serve to limit production growth.
• US milk production is forecasted to grow by 1.1% in 2023.
• For Q1 2023, milk deliveries in the EU and UK are expected to be up by around 1.2% yoy. In Brazil, supply is forecasted to increase by 1.5% in H1 2023, while other South American regions are likely to see reduced production.
• Milk production in New Zealand it is expected to contract by around 1.5% for the 2022/23 full season, while no growth is likely to occur in Australia until at least 2024. China also joins the wagon of expected lower production in 2023.
Demand is expected to be lower through 2023 as the outlook of global economy still remains gloomy and has further resulted in:
• Household consumption deteriorating with increasing inflation.
• In China, import demand is likely to remain sluggish until Q3 as it sits on ample stocks. More recently there has been some improvement in imports following the end of its zero-COVID policy.
• With sluggish demand and improved milk production in the major producing
regions, prices are likely to ease in the near to medium term.
• Higher costs of production and labor shortages will continue to weigh on production growth.
Few other key points to keep a track on the prices which seems under pressures is because:
• European processors are currently dealing with what appears to be very good conditions for a strong spring milk flush. This could continue pricing pressure on all product categories for a while longer.
• Milk prices paid to farmers are falling at a rapid rate in Europe at the moment.
• Farmer’s price intake has dropped between 4%-7% for March alone with more declines expected as pricing of finished dairy goods, and retail pricing in particular, continue to fall.
• Surging energy prices and other costs of production and above all the last thing farmers need is a falling income leaving little choice but to cut output.
However, those outcomes are likely not going to really hit until the 2nd half of 2023. With falling milk availability in Oceania, Europe being more comfortable with their sales book and China re-opening, the markets should be showing some signs of life but that just doesn’t appear to be the case yet. The over-hanging high inventories, very high USD and climbing global interest rates may still continue to damper buyers.
The low/medium heat nonfat dry milk (NDM) price range and mostly price series moved lower Some spot purchasers have shown increased availability and lower prices contributed by:
• Lighter demand from both domestic and international purchasers, who are limiting their purchases to meet their immediate needs.
• Processors have plenty of milk available for drying, and they are utilizing strong milk volumes to operate steady production schedules.
• High heat NDM production is limited, as processors are focusing on low/medium heat NDM.
• Spot inventories of high heat NDM are tight, though stakeholders say demand is limited. The high heat NDM price range fell at the bottom this week, while the top was unchanged.
The Oceania skim milk powder price moved lower at both ends of the range:
• SMP prices eased at last gDT event. North Asia was the largest buyer of SMP.
• Offered supply volumes were down compared to the previous event, spot demand tracked lower.
• Available supplies are filling customer contractual agreements. New Zealand SMP production is stable. The SMP undertone is unsettled as the market gets a better understanding of regional supply volumes.
Following a brief lift in prices at the end of February, European skim milk powder (SMP) prices again moved lower during the last few weeks.
• Demand has slowed, allowing prices to settle lower again. What was once a slightly bullish sentiment has turned now slightly bearish.
• Buyers have reduced their purchasing activity because their near-term needs are filled.
• As long as milk supplies remain sufficient for most processing needs, the urgency to assure coverage for later in the year is also subdued.
• SMP supplies are readily available, and with ample milk supplies, SMP production is active.
The Oceania whole milk powder (WMP) price is steady on the bottom of the price range, but lower on the top.
• Last gDT saw an ease in demand from Middle East, Southeast and European buyers. North Asian buyers bought the most WMP at this auction.
• The volumes offered were lower than the previous event.
• Prices are expected to remain steady in the near-term and is projected to increase slightly, later in the year.
• Oceania WMP output is steady, around available milk supplies.
Whole milk powder prices are unchanged.
• Brazilian whole milk powder (WMP) importing has recently slowed.
• Despite that processors in Argentina and Uruguay are not yet concerned with the current availability, as regional inventories are noted as somewhat tight.
• Buyers relay similar sentiment with supply outside of contractual needs being somewhat scarce throughout Q1.
• That said, if Brazilian customers do not start to increase their ordering for the upcoming quarter, traders are
expecting to shift more available inventories into other global markets. Market tones are unassured, as Q1 approaches its final weeks.
The top of the dry whole milk price range slid lower for the second consecutive week.
• Offers have increased, and feed brokers continue to suggest more dry whole milk has moved into feed channels, signaling a slightly bearish turn.
• Trades are taking place near the bottom of the range than the top making the spot market activity steady to quiet.
• Milk availability has grown and is expected to grow further in the coming weeks, but dryer time is not dedicated to whole milk processing in many cases, particularly with robust amounts of condensed skim and buttermilk available for processing.
European whole milk powder (WMP) prices moved lower, as market activity has become quieter.
• Sales of WMP have grown sluggish from both export channels and from within the European continent.
• Buyers are hesitant to take on more WMP without an increase in demand for the finished goods that use the WMP.
• Supplies are adequate to meet most buyer demand, and production is in balance with the current demand.
The Oceania butter price strengthened at the top of the range but declined slightly at the bottom of the pricing range. At the last gDT event, buyers from North Asia were active with purchases, while several other regions eased their purchases. As the Oceania production season steadily declines, reducing the butter supply, market representatives expect butter prices to fluctuate near current levels in the present climate.
The European butteroil price range expanded, while the European butter price range moved lower.
• Unsettled market with some variability of butter markets within the EU.
• European butter prices have largely trended lower, in some countries whereas Germany prices have recently increased slightly.
• Demand is sound, and there is an expectation that orders, especially for retail packaged butter, will pick up as the spring holidays get closer.
• Block butter demand has been slower to develop. Butter production is active, as cream availability has increased, and prices for cream have fallen.
• Butter supplies are sufficient to meet most buyer needs.
• Block butter demand has been slower to develop. Butter production is
active, as cream availability has increased, and prices for cream have fallen.
• Butter supplies are sufficient to meet most buyer needs.
