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Developments in the dairy market

Developments in the dairy market. Milk Forum Tartu 14.11.2012. EUCOLAIT. EUCOLAIT is the European Association of Dairy Trade representing nearly 500 European wholesalers, exporters and importers of dairy products.

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Developments in the dairy market

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  1. Developments in the dairy market Milk Forum Tartu 14.11.2012

  2. EUCOLAIT • EUCOLAIT is the European Association of Dairy Trade representing nearly 500 European wholesalers, exporters and importers of dairy products. • EUCOLAIT promotes the interests of the dairy trade at the European Institutions, is a platform for discussion and meetings for European and international dairy trade companies and provides an unparalleled information service for European dairy trade. • For more information: www.eucolait.be

  3. Developments in the dairy markets • Developments in Supply • Developments in Demand • Developments in Market Prices • Developments in Policy • Conclusions

  4. EU supply in recent years • Structural under-supply of quota since 2006 • Effect of 2009 financial crisis clearly visible • Recovery started in 2010-11

  5. EU supply in recent yearsDifferent scenarios

  6. Global Supply in recent years3 biggest dairy markets 1000 MT Source: USDA

  7. Global Supply in recent yearsLarge dairy Importers 1000 MT Source: USDA Source: USDA

  8. Global Supply in recent yearsLarge dairy exporters 1000 MT Source: USDA

  9. Global Supply in recent yearsAnnual Growth Rate Source: USDA

  10. Global Supply Development2011/12 season

  11. EU Supply this year • Up 1.2 % from Jan – August 2012 versus same period in 2011 • Down 2.9 % in August 2012 versus August 2011 • Contraction especially in Germany, Ireland, France, UK & Denmark • Slower growth in Poland, Latvia, Estonia, Czech Republic, Hungary

  12. US Supply this year • Strong expansion from Jan till April • Slower Growth from May till August • Contraction from now onward ? • Herd reduction

  13. NZ Supply this year • Strong start of new season • Peak production day was 4 to 5 % above last year • How will lower milk price affect balance of the season?

  14. Australian Supply this year • Continued growth at start of new season • Growth reportedly is slowing down in recent month

  15. Argentinean Supply this year • First 6 months of the year well above H1 2011 • Since August contraction • Milk price biggest concern

  16. EU Supply Post QuotaCommission: modest growth 2015 – 2020: + 3.5 % Source: Commission's Prospects for Agricultural Markets and Income in the EU (2011-2020), December 2011 Quota excluding direct sales

  17. EU Supply Post QuotaRabo bank: Diverse picture • Ireland: + 40% • Western Europe + 10% • North East+ 5% • UK and South - 5 % • EU as a whole+ 7 to 8 %

  18. EU Supply Post QuotaMilk Belt

  19. The Global Milk Market 11 Source: Fonterra (October 2012)

  20. Developments in the dairy markets • Developments in Supply • Developments in Demand • Developments in Market Prices • Developments in Policy • Conclusions

  21. Moderate EU consumption growth • Population growth will remain marginal : + 0.2% • Per capita consumption of • Liquid milk products remains stable or declines • Fresh dairy products increases at moderate rate • Cheese increases at a moderate rate • Butter remains stable at best despite gaining market share over margarines • Consumtion of milk powders remains stable • The overall EU consumption growth of milk solids is expected to be well below 1% in the coming years

  22. More exports in recent years • Exports have become increasingly important • Out of every 10 kg of • Whole Milk Powder, 5 kg is exported (50 %) • Skim Milk Powder, 5 kg is exported (50 %) • Cheese, 0.8 kg is exported (8 %) • Butter, 0.7 kg is exported (7%) • Overall milk solids, 1 kg is exported (10 %) • Milk production growth at 1 % or more per year will move these numbers further up because global demand is there and domestic demand isn’t.

  23. CheeseContinued positive development Source: Commission's Prospects for Agricultural Markets and Income in the EU (2011-2020), December 2011

  24. CheeseGrowing exports

  25. CheeseGrowing exports

  26. ButterStatus quo? Source: Commission's Prospects for Agricultural Markets and Income in the EU (2011-2020), December 2011

  27. Butterdeclining exports

  28. Butter ExportsWhen the price is right

  29. Whole Milk PowderAlso status quo or slight progress Source: Commission's Prospects for Agricultural Markets and Income in the EU (2011-2020), December 2011

  30. Whole Milk PowderExports on the way back

  31. Whole Milk Powder ExportsAgain when the price is right

  32. Skimmed Milk PowderA short lived success story? Source: Commission's Prospects for Agricultural Markets and Income in the EU (2011-2020), December 2011

  33. Skimmed Milk PowderBooming exports

  34. Skimmed Milk Powder ExportsSuccess story continues

  35. The Global Milk Market Source: FAO Short Term Outlook (May 2012)

  36. The Global Milk Market 11 Source: Fonterra (October 2012)

  37. World Dairy Market at a Glance Source: FAO FoodOutlook (November 2012)

  38. Cheese Trade Source: FAO FoodOutlook (November 2012)

  39. Skim Milk Powder Trade Source: FAO FoodOutlook (November 2012)

  40. Whole Milk Powder Trade Source: FAO FoodOutlook (November 2012)

  41. Butter Trade Source: FAO FoodOutlook (November 2012)

  42. Developments in the dairy markets • Developments in Supply • Developments in Demand • Developments in Market Prices • Developments in Policy • Conclusions

  43. The global market influences EU price • EU prices and Global prices are increasingly alligned • Refunds at zero • Cheese and butter prices because of the lower production/export ratio’s can permit periods of price disconnection but not for an extended time • SMP and WMP need to respond quicker to changes on the world market or vice versa the world market will respond quicker to changes in the EU market

  44. Global Cheese PricesLatest Developments • US prices lost competitiveness this summer • EU prices suffered less from weak first half of 2012 and seem to be more stable • Oceania prices are firming in response to US and EU prices

  45. Global Butter PricesLatest Developments • More volatility for all sources • EU spread became almost 0 in Q2 2012 • EU & US summer price rally is now also sending Oceania prices higher.

  46. Global Whole Milk Powder PricesLatest Developments • EU prices came close to Oceania prices in Q2 • Butterfat price rally in the summer widened the gap again • US not really a factor for WMP.

  47. Global Skim Milk Powder PricesLatest Developments • US challenged EU position at the beginning of the year but price rally changed the equation. • Oceania was long uncompetitive but is now back in the game. • Spread between origins is smallest for SMP.

  48. Volatility in dairy prices

  49. What futures contracts are available? • Chicago Mercantile Exchange • Class III Milk • Cheese • Cheese Spot Call Blocks • Cheese Spot Call Barrels • Dry Whey • Class IV Milk • International Skimmed Milk Powder • Nonfat Dry Milk • Nonfat Dry Milk Spot Call Grade Extra • Nonfat Dry Milk Spot Call Grade A • Butter • Butter Spot Call

  50. What futures contracts are available? • Eurex • EU Butter • EU SMP • EU Whey Powder • NZX (New Zealand) • WMP • AMF • SMP • NYSE Liffe • EU SMP • OTC • Flexible contracts

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