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DAIRY COMMODITIES MARKET INTELLIGENCE - Q4 2023

Milk production from the Big 7 export regions grew by 0.3% YOY in 2023. This downgrade from the Q3 estimate of 0.5% is driven mostly by reductions in key global regions, including the US, EU, and New Zealand. Into 2024, output is expected to climb by 0.4%, but far less than the 1.6% annual average gain from 2010-2020.

Milk production is quickly increasing towards the seasonal peak in Oceania. Total season output is expected to be lower, driven by the weak milk price, with the October peak watched closely in the market.

  • China’s dairy demand recovery has to date not offset strong domestic milk production growth. China, in particular, is likely to experience a protracted downturn in dairy imports, meaning that hopes for a demand-led recovery in global indicators are faint in the short term. Indications
    suggest Chinese milk production is still growing, demand is soft, and stockpiles are burdensome.
  • Milk production growth has slowed into H2 2023 and into Q4 and shows slowing down entering 2024, but a complete market rebalance is not expected in the near term.
  • New Zealand’s search for markets outside of China, has a domino impact.
  • EU WMP has not been price competitive in global markets for some time.
  • More recently, EU SMP (and FFMP) exports have faced more competition in markets that traditionally lean more towards European suppliers, especially during New Zealand’s low season. This drifting might lead to more milk being allocated to cheese, away from SMP and butter.
  • The domino impact continues to South America. Lower Oceania dairy product prices have made Argentina- and Uruguay-sourced products less competitive in North Africa and other regions.
  • Shipments to Brazil have increased.
  • Till now Q4 2023 exports were marginally up YOY by 2.4%.

SKIMMED MILK POWDER - Q4 2023

OCEANIA

  • The price range for skim milk powder in Oceania is steady with trading activity light due to moderate demand from export channels.
  • From a regional perspective, Asia and China markets report decreases in Oceania SMP interest.
  • SMP output in Oceania is still constrained by milk supplies, which are increasing, but still have a way to go.
  • Manufacturers look to maintain a good supply-to-demand inventory balance, while some buyers having secured near-term SMP coverage are willing to wait and see what the new Oceania milk season produces.
  • Australia is maintaining SMP production in the face of shorter milk supplies by prioritizing milk going into butter/SMP at the expense of WMP production.
  • The SMP market from Oceania undertone is stable.

EU

  • Prices for European skim milk powder moved lower even though we see an uptick in recent SMP buyer interest.
  • Buyers want to buy the older, less expensive SMP, and manufacturers are eager to remove the older stocks from the warehouse.
  • Processors say moving fresh production at the top of the price range is more difficult with plenty of the older stock on hand and Inventories are generally available to meet buyer needs.
  • Some processors are opting to sell liquid skim milk concentrate instead of drying due to favorable pricing for the concentrates and high energy costs as a result, SMP production is steady to lower.

USA

  • Both ends of the low / medium non-fat dry milk price range moved higher in the West.
  • Stocks are available to accommodate spot market purchasers. Domestic demand is steady to moderate.
  • Export demand is more mixed. Demand from South American purchasers remained steady and active, overall, the demand remained more inconsistent and quieter during Q3 and is already showing recovery signs in Q4.
  • Few areas have slightly looser milk supplies this week, low / medium heat NDM production is lower as seasonal milk output reductions are at hand.
  • High heat NDM prices moved slightly higher on the bottom end of the range.

WHOLE MILK POWDER - Q4 2023

OCEANIA

  • Oceania whole milk powder (WMP) market prices adjusted higher to lower at the ends of the pricing range.
  • Southeast Asia led a moderate upsurge in demand.
  • WMP inventory volumes are improving in New Zealand.
  • In Australia, little WMP is being made while seasonal milk supplies are shorter than desired. The market has a mixed undertone.

EU

  • Prices for European whole milk powder moved lower.
  • Demand is quiet outside of contract fulfillment and WMP stocks are sufficient to fill buyer needs.
  • Manufacturers are making WMP to fill current orders or to maintain inventory levels but not much else.
  • Dryers compete against the stronger pulls from cheese vats and other processing needs for available milk.
  • The market tone for WMP is quiet.

USA

  • The price range for dry whole milk was unchanged this week.
  • There is a steady demand from contract purchasers, who are working to secure quarterly contracts ahead of the end-of-year holidays.
  • Spot purchasers are in demand although spot inventories are tight.
  • Whole milk production is limited, as production is focused on nonfat dry milk and skim milk powder.
  • Whole milk is being produced primarily to fulfill contractual obligations, leaving very little space for spot market requirements.

CHEESE & BUTTER - Q4 2023

CHEESE

  • Cheese prices adjusted lower on the bottom of the range but moved higher at the top of the range.
  • Demand is steady with trades made even for Q1 2024.
  • Higher pricing relates to current demand.
  • Buyers who can wait for deliveries can get lower range pricing. Increases in seasonal cheddar production has softened low range prices.
  • Cheese manufacturers are maintaining production schedules that bring about adequate inventory levels.
  • Overall, the market undertone is steady.

BUTTER

  • EU butter and cream prices increased significantly in early Q4
    after showing stability till early Q3.
  • The availability of French and German butter remained tight, as local cream prices (between EUR 5,800 MT and EUR 6,000 MT based on 100% fat) were giving processers a better return. As a consequence, butter production has been reduced which has also caused a lower availability of liquid and dried buttermilk.
  • Most EU end users allowed themselves to postpone their purchases for Q1 2024 in the hope of better prices at the end of the calendar year. Normally, this would be a logical idea, as cream prices historically decrease during December.
  • Oceania butter is still showing competitive levels.
  • Market Outlook: Stable to bullish.