DAIRY REPORT

Global dairy commodity update

Weather and political outcomes will affect milk production prices for the rest of the year.

There are several outside influences that will have an effect on the global dairy trade.

The global milk balance will remain tight as milk production will slowly expand, while strong trade demand has tightened milk powder stocks. The market won’t necessarily bring firming prices across the board – the implications for each commodity by region differ depending on local balance sheets and demand-side capacity, which includes economic effects. That will change if a hot and dry European summer is followed by a failed New Zealand spring. There is also a need to consider the wider political and trade risks such as the escalation of the USChina trade dispute, increased chances of a no-deal Brexit outcome, and the political and economic challenges for Algeria. These will threaten dairy market stability through 2019.

Skim Milk Powder The European Union (EU) prices have been gradually firming with slow growth in output as well as there being lower stocks. There has been sustained premiums for New Zealand SMP over EU and US products. Growth in export trade has been strong at attractive prices, driven by Southeast Asia, Mexico and China.

Whole Milk Powder There has been a weak finish to the New Zealand season with reduced availability. Strong growth in Chinese demand has tightened the New Zealand balance sheet. Prices are weaker as buying activities slow with reduced availability from Latam.

Butter The EU market is weaker with adequate availability and some weak demand signals. New Zealand prices have been driven higher by GDT management, weakening with pushback at high prices. There is also patchy growth in global trade, conditional on affordability in developing regions. The US market is firm with improving demand and tighter supply.

Cheese Global cheese trade increased by 4.4 per cent in March, the slowest expansion this year. EU prices have been steady with good domestic demand but slower exports. The higher production in EU is filling new plant capacity. The US market has lost some ground despite reportedly tighter cheddar supply while there has been improved North Asian demand.

Whey There have been poor commodity whey prices due to tariffs on US products and the culling of Chinese and other Asian countries’ pig herds. The US market remains weak with poor demand prospects, but there have been improving WPC-80 markets as stocks ease. The complex effects of African Swine Fever (ASF) will continue to unfold well beyond the impact on commodity whey prices. F