Dairy Commodities Market Intelligence - Q2 2022

Home > Industry News > Dairy Ingredients Industry News > Dairy Commodities Market Intelligence – Q2 2022

OVERVIEW Q2 2022:

June 2022 reflected an almost universal tale of wholesale price drops. All regions saw a month-on-month drop in prices across all product categories, except for US cheddar. Supplies remained tight with reports claiming that demand for most dairy products has cooled slightly in recent weeks, due to higher consumer prices and uncertainties around shipping logistics with China. European Union (EU) prices dropped in US dollar terms with the region nearing peak milk production. However, volumes are still behind that of last year. Skimmed Milk Powder (SMP) has seen the largest drop, though production remains steady, demand from the export markets currently seems noticeably quiet.

Prices in Oceania saw the largest change, influenced by the lack of demand from China as reflected in the latest Global Dairy Trade (GDT) events. Most products felt the effects of this reduced demand, with Whole Milk Powder (WMP) showing the largest decline at 10.5%. Poor pasture conditions, high feed prices, and staff shortages in key milk-producing areas continue to have an impact on milk production in the region, consequently, limiting whole milk powder and cheese exports.

US prices avoided the declines seen in Oceania and Europe, with Butter and SMP prices seeing the largest drops of just 1.2% each. Cheddar cheese markets however stood out, bucking the downwards trends with a price increase of 5.5% on the month. Retail demand was softening, putting some downwards pressure on the markets. However, sustained food service demand gave some support to the butter markets. Additionally, strong export demand gave a boost to cheese prices, particularly from Asian buyers looking to secure supplies.

SKIMMED MILK POWDER (SMP)

EU

• European SMP price range moved lower.
• Currently, SMP demand is low with many Europeans on their summer holidays and buyers concerned about high SMP prices, market uncertainty exists while there is no urgency to contract.
• End users do not have much of their coverage in place throughout the year.
• Manufacturers also see the potential for tight supplies and higher prices for energy and milk, weighing heavily on their ability to produce SMP through the end of the year.
• Current SMP production is steady and as active as available milk intakes allow. SMP inventories are stable.

OCEANIA

• Prices for skim milk powder (SMP) dipped at the recent GDT event 311.
• The market is seeing active contracting, at the upper end of the range, through January.
• Lowest SMP contracts are now below the WMP lowest priced contracts.
• Interest is steady, with reports on trade volumes being picked up in July contracts, as open interest continues to gain steam.
• Some of the available milk is being drawn to other products, especially WMP, where contracts remain to be filled.

USA

• International interest in loads of low/medium heat nonfat dry milk (NDM) has continued to reflect the slowdown.

• Buyers in Mexico remain hesitant to buy at current prices and are focusing on fulfilling their immediate needs.

• Domestic demand for low/medium heat NDM has also seen a decline.
• Softening of demand and increasing spot availability are contributing to lower prices.

• Production of low/medium heat NDM being steady, some manufacturers continue to report an inability to run at capacity due to labor shortages and delayed deliveries of production supplies.

• Drying schedules continue to focus on the shorter production times of low/medium heat NDM, limiting the production of high heat.

• Demand for high heat NDM is steady to lower, and spot inventories are tight. Both ends of the price range for high heat NDM slid lower this week.

WHOLE MILK POWDER (WMP)

EU

• WMP prices in Europe decreased, however, it’s still above those prices from other parts of the world.

• Prices for German WMP is higher than in other parts of the EU.

• WMP demand has decreased. Besides higher prices, many buyers have coverage for their immediate needs and are willing to wait for more attractive offers.

• Inventories are in balance with current demand, and WMP production is used to fill immediate needs.

OCEANIA

• The Oceania whole milk powder (WMP) price is moving downwards, with a wider spread, as a weak market pushed WMP prices lower at each end of the range.

• The volatile market was expected to weaken the prices, as WMP contracts on the GDT had decreased.

• WMP interest has picked up since the last auction, although there is a week-to-week uncertainty in the market.

• Processing plants are running schedules that handle Oceania’s relatively low milk supply.

• Based on the EU and New Zealand Free Trade agreement, New Zealand was granted a quota for WMP.

USA

• Dry whole milk trading activity was a little subdued this holiday and the price range held firm.

• Production is intermittent. Drying schedules are largely driven by contract obligations as for some plants, dry whole milk production is secondary to drying condensed skim or other commodities.

• Dry whole milk spot supplies are tight. Domestic demand is in level with confectioners and bakers presenting steady interest for their production needs.

• National dry whole milk market tones remain steadily quiet.

BUTTER

EU

• European butter prices moved lower due to the demand being quiet as Europeans begin their summer holidays.

• Retail and block butter orders are light, while offers from manufacturers are limited. Butter stocks are tight but growing.

• Industrial cream prices have eased slightly, but cream prices are still high. As a result, butter makers are content to churn butter and fill existing contracts or build inventories when they can find affordable cream.

• At current butter prices, end users will have to watch the developments through the summer, hoping for more favorable price conditions.

• Inflation rates have also prevented butter exports, prices for European butteroil is mixed, moving up at the bottom of the range but lower at the top of the range.

OCEANIA

• The Oceania butter price market moved lower on both ends of the range as the spread widened.

• Offers are down 8% from last July.

• Market observers anticipate butter prices to see a gradual decline.

• Manufacturers are shuffling between filling orders against building inventories.

• Interest is steady to high for contracts through October.