national dairy committee 29th april 2014
DESCRIPTION
Irish Farmers' Association Dairy Market ReportTRANSCRIPT
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DAIRY MARKET REPORT22nd April 2014
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SUPPLY UPDATE• Production growth continues apace in the US (+1.0% for Jan/Mar 14 v 13, but slower
at +0.9% for Mar alone), the EU (+4.6% in January) and New Zealand (+6.4 % for the season to Feb, but +11.8% in Feb. Drought in N Island reported to slow down March/April supplies)
• Expansion plans by farmers and industry in NZ for next season (whole milk powder investment)
• Production has rallied in Oz: while season is down 1.4% to Mar, increases since Dec, and Mar was +3.7%.
• Floods in Argentina have affected main dairy regions badly.• EU: supplies were rising fast in January, in Germany (+4%), France (+3.5%), the UK
(11.4% for Jan, and unconfirmed 12.1% up for March - NB, UK still expected to finish the 13/14 year 10% under quota), The Netherland (+5.1%), Poland (+7.3%)
• Wet weather slowed Irish growth: Jan + 2.2%, but Feb - 4.4% • UK supplies are rising so fast that they are currently exceeding processing capacity
availability -> some distress milk sloshing about (some coming into NI??). “Spot” milk prices of 26-28ppl (31.6-34cpl) or less mentioned against “going rate” of around 33-34ppl (40-41.3 cpl)
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Stocks• EU APS butter/cheese – Zero• EU intervention butter/SMP - Zero• US butter – 80,000t (March 14 – trend up, but
30% less than same time 2013)• US SMP – 67,000t (Jan 14 – trend up, but 25% less
than same time 2013)• No info on private stocks, but buyers tend to
operate JIT as much as possible, so private stocks likely low.
• Chinese stocks reported “healthier” – i.e. less depleted, which has slowed demand.
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Market developments – China remains crucial
• Chinese demand growth slowing, stocks returning to “healthy” levels (they were bare till now)
• NZ tariff free quota filled up by April• Chinese domestic supplies ramping up with spring – but still behind
demand, and likely to remain so for some time• Forecast demand growth of 8.2% p.a. 2012 to 2017 (increasing
consumption, better distribution networks arising from increasing urbanisation), forecast supply growth 1.2% p.a. same period.
• 900,000t of shortfall in domestic supplies -> needs to be made up for by imports, and this is expected to firm up prices in the medium term.
• Forecast from traders: consolidation of global prices around current levels, possible rebound in market coming up to 2015 because of continued Chinese demand (due to domestic shortfalls).
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Market developments – what about Russia?
• Tension in Ukraine and possible trade sanctions a concern• Butter and cheese imports from Russia very important for
EU market balance. Massive imports and increases continue (see below).
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Market developments – EU markets
• Supplies well up• While cream prices holding up (avg EU around €4,100/t),
butter prices have eased (F and D butter around €3,550/t, Dutch price slightly higher, Irish butter price around €3,300)
• SMP was more stable at around €3,100, but now easing to around €3,000.
• Whey prices average around €950, with some lower reports (€900/t)
• Cheese markets are remaining firmer. Cheddar cheese markets in the UK are reported firm, with mild around £3,150/t and mature, depending on origin, up to £500/t above that.
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1/5/2
014
1/10/2
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1/15/2
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1/20/2
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1/25/2
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1/30/2
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2/4/2
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2/9/2
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2/14/2
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2/19/2
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2/24/2
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3/1/2
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3/6/2
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3/11/2
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3/16/2
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3/21/2
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3/26/2
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3/31/2
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4/5/2
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4/10/2
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4/15/2
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4/20/2
0140
50
100
150
200
250
300
350
400
450412
360
324307
375
355
403 399
104 95
EU AVERAGE DAIRY COMMODITY PRICES
JANUARY 2014 TO 20/04/201
BUTTERSMPWMPCHEDDARWHEYPOWDER
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BUTTER SMP WMP CHEDDAR0
50
100
150
200
250
300
350
400
450
360
307
355
399
276.4 286.2 287.8308.2
EU V GDT DAIRY PRICES - MID APRIL 2014
EU avg 20/04/2014GDT 15/04/14
Euro
per
100
kilo
s
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GDT auction results – 15/04/1412
Total quantity traded:36,549 tonnes
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IDB PPI INDEX13
Note: a milk price 31.45% above 2010 avg milk price (CSO) would amount to 38.47c/l+VAT
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RETURNS FROM AVERAGE EU DAIRY COMMODITY PRICES20TH APRIL 2014
WAS - 30th March 2014ESTIMATE OF RETURNS FOR REPRESENTATIVE IRISH PRODUCT MIX
Calculations 04/04/14Avg EU mkt price at 30/03/14 - €/t c/l equiv
Estimated coeff.
BUTTER 3650 SMP 3180 44.77 35% 15.67CHEESE 4000 WHEY PWDR 990 47.11 41% 19.32WMP 3640 45.15 8% 3.61OTHER* 38.05 16% 6.09 44.69ASSUMING THAT "OTHER" RETURNS 15% LESS THAN SMP/BUTTER
NOW - 20th April 2014ESTIMATE OF RETURNS FOR REPRESENTATIVE IRISH PRODUCT MIX
Calculations 24/04/14Avg EU mkt price at 20/04/14 - €/t c/l equiv
Estimated coeff.
BUTTER 3600 SMP 3070 43.56 35% 15.25CHEESE 3990 WHEY PWDR 950 46.76 41% 19.17WMP 3550 44.03 8% 3.52OTHER* 37.03 16% 5.92 43.86ASSUMING THAT "OTHER" RETURNS 15% LESS THAN SMP/BUTTER
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Returns for Irish SMP/butter = 42.59c/l
before processing costs
Milk price equivalent
37.59c/l + VAT = 39.47c/l incl
VAT
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BUTTER/SMP and equivalent raw milk value (Germany)
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Outlook for milk prices in 2014
• Prices to Feb have either increased or stayed static at high level in all EU
• Some negative price signals in Lithuania, Estonia• Friesland Campina guaranteed price is to fall by 0.5c/kg
from March• UK -> main retailers with producer contracts have
increased prices, but all eyes are on Arla price• Irish prices: current levels comfortably sustainable at
current market returns (mid-late April)• Some easing likely thereafter. Extent? Timing?• IFA pushing for peak milk to collect strong milk prices.
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Medium term outlook remains very good
• Undersupplies continue in China – demand rising, should continue to underpin trade and prices
• Uncertainty re. Russia – but if no trade sanction and/or other crisis related to Ukraine -> imports continuing to rise
• Strong growth in Irish butter sales in UK, Germany, Russia and USA
• Powder prices also remaining relatively strong (though easier)
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New Milk Market Observatory
• Find it here: http://ec.europa.eu/agriculture/milk-market-observatory/index_en.htm
• Aims to provide EU Commission and operators with uptodate facts and figures to help with prompt decision making (especially re. market management measures).
• Same data as was available before, for the moment, but updated more frequently (not for everything)
• Work in progress, more info will be added.
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