Milk Market Observatory Last update : 23.05.2017
MMO Economic Board Meeting of 23 May 2017
o The 21st meeting of the MMO Economic Board
took place on 23 May 2017, with the participation of experts from the various steps in the milk supply chain: CEJA (young farmers), COPACOGECA (producers and cooperatives), ECVC (Via Campesina), EMB (European Milk Board), EDA (dairy industry), Eucolait (dairy trade) and Eurocommerce (retail). Presentations and information exchanged during the meeting showed the following. o EU milk collection decreased by 2.3% in Q1 2017
(January-March), i.e. by 900 000 t (no leap day correction). The drop in March has been particularly strong in DE, FR, UK, IT and DK in volume terms. o Average EU farm gate milk prices reached 33.1
c/kg in March 2017, in line with the last 5 years' average, but 17% higher than in March 2016. Estimates for April point to a slight decrease to 33 c/kg in April. o EU dairy product prices
have been generally recovering in recent weeks. New record levels have been reached for butter (450 â‚Ź/100 kg). Divergences between protein and fat prices are deeper, hinting at a structural change. With present exchange rates, EU dairy prices are generally more competitive than Oceania but less than the US.
o There
have been no sales out of public intervention so far in 2017, while buying-in has resumed since the beginning of April. Quantities remain however limited (7 365 t by mid-May)
o The assessment of EU stock levels based on a
residual approach (production + imports – consumption - exports) shows normal stocks for SMP, surplus production being in public intervention. Butter stocks have slightly increased but remain below normal levels given solid demand. Cheese stocks have also increased but stay at normal levels thanks to dynamic demand. o World milk production closed Q1 2017 with a
decrease by 1.25%, mainly driven by the EU where production fell for the 10th consecutive month. NZ and Australia are expected to end their respective season with negative figures but the
decrease has been slowing down lately. The US continue to be the major exception, with growth rates month after month. o Global
demand appears healthy as well as domestic use. EU exports are performing particularly well. Imports have increased in most destinations, in particular in China.
o With
regard to EU retail sales, liquid milk consumption continues declining. Demand for butter, cheese and other value-added products (milk shakes, desserts) shows more positive developments. Increased competition was confirmed in the UK from vegetal based substitute products.
o The next publication of the Commission's Short
Term Outlook (due in July) is being worked on, integrating latest developments. On the positive side, account is taken of a 3.5% reduction in EU milk production in Q4 2016, followed by a 2% reduction in Q1 2017, lower milk collection in South America, NZ and Australia, increasing EU demand in particular for cheese, butter and WMP, high butter prices and good exports. On the negative side, consideration is given to a sizeable dairy herd, a projected annual increase by 0.6% of EU milk deliveries, continuous increase in US production, expected recovery in NZ milk collection and the existence of SMP public stocks. Weather conditions in the coming weeks will be key for forage quality and quantity, which play a major role in milk production. o Facts and figures were also discussed on the UK
milk sector, its high reliance on other EU MS to meet its internal needs, its export performance on third country markets, its particular deficit in butter and cheese and the MS most engaged in dairy trade with the UK (Ireland, France, the NL and Belgium being both concerned on the import and export side). o Overall, the market continues to be characterized
by an unprecedented price gap between fat and protein. Market sentiment is however rather positive, given dynamic demand both in the EU and third countries.