july 2012 dairy markets worldwide volume 2 • number 5...

GLOBAL BRIEFING July 2012 Volume 2 • Number 5

BLIMLING AND ASSOCIATES, INC © 2012 Blimling and Associates, Inc. This report is prepared for the exclusive use of Blimling and Associates’ clients. Reproduction in part or in whole without permission is strictly prohibited.

This information is carefully compiled, but not guaranteed to be complete or free from error; nor does it constitute a solicitation to buy or sell futures/options contracts. Futures and options trading involves risk. Contact a licensed professional for more information.

DAIRY MARKETS WORLDWIDE

TURNING POINT? With a devastating drought sending US grain prices to record levels, dairy markets have

turned edgy and, in some cases, frenzied. As milk production growth is already slowing, con‐cerns are heightened about supply availability later this year and into the next. At least that’s the sentiment in the US, where futures markets have rallied, trying to keep pace with grain market gains. Sellers are reluctant to offer much product going forward, when supplies could be tight and higher prices are anticipated. Buyers are trying their best to avoid fueling the fire by taking coverage, but prudent risk‐management almost necessitates some level of protec‐tion, adding a bid to a market marked by few offers.

In Europe, however, producer’s problems are tied to lower milk prices, the result of ongoing supply strength and soft global demand conditions. Production through May was stellar, with year‐to‐date output 1.7% higher than last year. Consequently, external EU exports have surged, with “extra” dairy products making their way into the world market. Through May, SMP ex‐ports were 22% or 45,000 tons higher than in 2011, with cheese shipments up 8% and casein posting a 30% gain. WMP was the only outlier, with exports down 6% in the same time period. But: farm‐gate milk prices are eroding, and now approach break‐even levels. If revenues con‐tinue to slide, a supply‐side slow‐down in Europe becomes more likely...at least eventually. For now, though, supplies remain ample with warehouses well‐stocked.

As is often (and appropriately) the case, all eyes are on New Zealand. With the new season un‐derway, cows are in good condition and enjoying lush pastures. Supply momentum will likely build through the third quarter. At that juncture, weather will be a critical determinant. If the environment remains favorable, world markets would seem adequately supplied into early 2013 even if US and European contributions shrink. If it turns dry, the world supply/demand balance would likely be altered in a way that points toward higher prices, especially for milk powders and proteins.

Though supply is in the spotlight, demand’s role cannot be ignored. China’s aggregate milk powder imports – a key to stronger dairy markets in the past few years – are essentially flat on a year‐over‐year basis. The EU debt crisis continues to take new twists and turns, affecting cur‐rency values and consumer moods. The US economy has been slowing, too. In short, it seems that there are few places in the world where consumers are able/willing to pay a lot more for dairy products.

GLOBAL BRIEFING July 2012 2

MILK SUPPLY The pace of US milk production gains has

slowed considerably and may continue to do so in light of high temperatures and fewer cows in June and July. June output was up 0.9% year‐over‐year — the smallest increase in 11 months. On a state‐by‐state basis, California production was held to a marginal gain of 0.3% from 2011 while Wis‐consin and Idaho were up 2.5% and 1.5%. Decreasing cow numbers will also weigh on future output—from May to June, the US herd lost 29,000 head.

FARM OUTLOOK

Weather in the US has damaged the corn crop to varying degrees depending on location. Drought conditions have plagued the corn belt and put the crop size in ques‐tion, with the only certainty being that it will fall well short of earlier expectations. As a consequence, volatility and emotion have ruled the grain and US milk futures markets. Since June 15, December corn has gained nearly $3.00 per bushel and Novem‐ber soybeans have climbed almost $4.00. September milk futures have moved $2.29 per hundredweight higher to rest above $19.00, the highest price since November.

It will take time to sort through final crop prospects and price impacts. Meanwhile, dairy producers’ costs have risen signifi‐cantly. So far, milk futures values have mostly kept pace. Our implied margin over feed cost index slipped to 6.2 for 2013 ver‐sus 6.3 a month ago — but remain above break‐even. Going forward however, any slippage in milk prices without some relief from grains will move producers closer to the line suggesting contraction.

US MILK PRODUCTION

US DROUGHT MONITOR

6,250

6,500

6,750

7,000

7,250

7,500

7,750

8,000

8,250

8,500

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

US MILK PRODUCTION

2010 2011 20121,000 Metric TonsSource: USDAFebruary 2012 adjusted for Leap Year


SOUTH AMERICA Milk is still flowing reasonably well in South

America. Uruguayan output was up 8.2% in June, with year‐to‐date production running 17.6% higher than 2011. Chilean production was up slightly in May, but is down fraction‐ally for the year. Current data is not availa‐ble from Argentina and Brazil, but in the lat‐ter, Q1 milk production was up 4.2% year‐to‐date. But, lower farmgate milk prices—attributed to sluggish demand—as feed costs increase, could constrain milk flows in the second half of the year.

OCEANIA Favorable conditions for milk production

persist Down Under with pastures in excel‐lent shape as the 2012/2013 season begins. However, concerns of a El Nino return—and lower than average rainfall – are grow‐ing. Also fueling milk production prospects: cow numbers. Agrifax reports that culling was light last season, resulting in herd growth of 100,000 cows, even before any replacements or on‐going sheep conver‐sions are considered. Final season data from New Zealand puts the 2011/2012 sea‐son up 10.0% year‐over year (May alone up 13.1%).

Australian milk production in May was up 3.9% versus May 2011.

Lower global dairy prices remains an issue for Southern Hemisphere producers. An‐other New Zealand manufacturer recently reduced estimates for 2011/2012 farmer pay‐outs to between NZ$6.00 per kilogram of milk solids and NZ$6.20. This is right in line with other previously announced estimates from other companies.

SOUTHERN HEMISPHERE MILK PRODUCTION

NEW ZEALAND SOIL MOISTURE ANOMALY

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500


AUSTRALIA/NEW ZEALAND MILK PRODUCTION

2010 2011 20121,000 Metric TonsSource: Dairy Australia / DCANZ


MILK SUPPLY EU milk production moved lower in May on

a year‐over‐year basis, the first such decline since April 2010. March output was revised to a gain of 2.8% year‐over‐year and April output was up 1.6%. Danish, French and German production were 2.6%, 2.6% and 2.3% higher versus May 2011, while Poland was up 9.0% and the UK was unchanged. In Ireland, torrential rainfall impeded output, with milk receipts in that country declining 0.1% in May with more severe losses expected in June.

Ample milk supplies this Spring created increasing dairy product stocks. Though Intervention stocks are nearly non‐existent due to market prices still being above inter‐vention levels, stocks in the private storage aid scheme are on the rise. Current PSA butter stocks exceed 91,000 metric tons versus 66,000 last year.

PRODUCER PRICES Data for April and May show European milk

prices dropping rapidly and June and July appear to be even worse, coming in below breakeven—a fact much publicized in the UK where it has triggered farmer protests. LTO Nederland reported an average EU price in May at €31.38 per hundred kilo‐grams, a new 21‐month low, though still above breakeven, at least in northern states. Should the trend continue, milk pro‐duction could be impacted. Individual state data for April show prices were lowest in Poland, coming in on average €5.64 per hundred kilograms below the EU average in the last 12 months. Despite the declines, a recent call by Poland and other nations to reinstitute export refunds was rebuffed.

EU MILK PRODUCTION

10,000

10,500

11,000

11,500

12,000

12,500

13,000


EU‐27 MILK PRODUCTION

2010 2011 20121,000 Metric TonsSource: MDC Datum/EuroStat

20 €

25 €

30 €

35 €

40 €

45 €

2006 2007 2008 2009 2010 2011 2012

EU FARMGATE MILK PRICES

Poland (€/100 kg) Ireland (€/100 kg)

France (€/100 kg) Germany (€/100 kg)

Source: MDC Datum

0

50,000

100,000

150,000

200,000

250,000

2006 2007 2008 2009 2010 2011 2012

EU BUTTER STOCKS

PSA InterventionMetric TonsSource: MDC Datum

2010 2011 2012 12 vs '11

Germany 2,576 2,616 2,676 +2.3%

France 2,168 2,187 2,244 +2.6%

United Kingdom 1,280 1,290 1,290 ‐0.%

Netherlands 1,000 1,028 1,024 ‐0.4%

Italy 937 926 884 ‐4.5%

Poland 829 834 909 +9.0%

Spain 520 525 538 +2.6%

1000 Metric Tons Source: MDC Datum

EU MILK PRODUCTION ‐ MAY


UNITED STATES US milk powder exports continue to trend

higher. Shipments through May totaled nearly 202,600 metric tons, up 12% or more than 22,000 metric tons from the first five months of 2011. May shipments alone to‐taled more than 45,000 metric tons, a 19‐month high. If this pace is maintained, the US will export more than 485,000 metric tons in 2012, a new record.

EU External EU shipments also increased, with

aggregate SMP and WMP exports up 9% year‐to‐date through May. The growth was driven by SMP: WMP exports for the first five months of the year were actually down 6% or 11,000 metric tons from 2011, totaling 171,000 metric tons. Conversely, SMP ex‐ports are up 22% or 45,000 metric tons for the same period to total 250,000 metric tons. In May, SMP and WMP exports to‐taled 53,000 and 45,000 metric tons, up 21% and 23% respectively.

OCEANIA New Zealand milk powder exports were

steady‐to‐higher in May. WMP shipments totaled nearly 95,000 metric tons, up 2% from April and up 10% year‐over‐year. SMP exports were basically even month‐to‐month at 25,000 metric tons, or down 5% versus May 2011. For the 2011/2012 season ending in May, combined shipments were up 3% over 2010/2011 totals.

Australian milk powder exports lag prior year levels as the season draws to a close. Combined powder exports are down 11% through May.

MILK POWDER EXPORTS

0

25,000

50,000

75,000

100,000

125,000

150,000

175,000

200,000

2007 2008 2009 2010 2011 2012

NZ MILK POWDER EXPORTS

SMP WMP (BF>1.5%)Metric TonsSource: GTIS

0

50

100

150

200

250

2005 2006 2007 2008 2009 2010 2011 2012

JAN‐MAY US NDM/SMP EXPORTS

Thousand Metric TonsSource: USITC

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2007 2008 2009 2010 2011 2012

EU EXTERNAL MILK POWDER EXPORTS

SMP WMP (BF>1.5%)Metric Tons Source: GTIS

2010 2011 2012 11 vs '10

China 24,974 30,587 46,154 +51%

Indonesia 13,834 9,222 14,704 +59%

Maylaysia 17,447 16,057 13,361 ‐17%

Philippines 20,641 14,967 12,805 ‐14%

Singapore 13,048 7,953 8,937 +12%

Thailand 7,845 15,148 7,263 ‐52%

Saudi Arabia 8,806 13,122 7,206 ‐45%

Metric Tons Source: GTIS

NEW ZEALAND SMP EXPORTS JAN‐MAY


EUROPE Extra‐EU cheese exports grew handily in

the first five months of the year, with total shipments at 298,000 metric tons, up 8% from 2011. At 65,600 metric tons, May ship‐ments were the most in a single month since November. Russia has been a prime source of EU export growth with shipments totaling nearly 94,000 metric tons through May, up 11% (9,500 metric tons) from 2011. The Middle East and North Africa have also increased imports from the EU.

UNITED STATES While data shows that US cheese remains

in high demand around the world, recent reports and US price competitiveness may suggest otherwise. Exports through May totaled more than 117,000 metric tons, up 18% (18,000 metric tons) from the same five months in 2011. Shipments to Mexico were up 27% or nearly 6,000 metric tons year‐to‐date. Exports to Saudi Arabia and Japan were also up by double‐digits, but Egyptian totals were down 64% or 2,700 metric tons. Cheese shipments to China are approaching significant levels, with the May total crack‐ing 1,000 metric tons for the first time.

OCEANIA Oceania cheese exports are mixed, with

year‐to‐date losses in Australia more than made up by gains in shipments from New Zealand. Through May, Australia exported 64,000 metric tons, 6% or 4,400 metric tons less than last year while New Zealand’s ex‐ports totaled 125,000 metric tons, up 20% or 20,500 metric tons from 2011. Rising US cheese prices mean Oceania once again has a clear advantage in international trade.

CHEESE EXPORTS

0

10,000

20,000

30,000

40,000

50,000

60,000

2007 2008 2009 2010 2011 2012

OCEANIA CHEESE EXPORTS

New Zealand AustraliaMetric TonsSource: GTIS

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2007 2008 2009 2010 2011 2012

EXTRA‐EU CHEESE EXPORTS

All Other USA RussiaMetric TonsSource: USITC

0

5,000

10,000

15,000

20,000

25,000

30,000

2007 2008 2009 2010 2011 2012

US CHEESE EXPORTS

All Other South Korea MexicoMetric TonsSource: USITC

2009 2010 2011 2012 YTD

Japan 46,325 53,346 61,175 25,035

Australia 52,349 54,289 46,471 20,760

South Korea 17,161 19,210 20,085 10,016

Saudi Arabia 12,620 8,843 6,940 7,311

China 9,222 11,702 13,536 6,899

Egypt 13,227 5,507 5,990 6,523

Indonesia 7,905 7,718 8,800 5,164

Metric Tons Source: GTIS, 2012 YTD through May

NEW ZEALAND CHEESE EXPORTS


ARGENTINA Argentine milk powder exports fell dramati‐

cally in May, with SMP shipments down 46% from April and down 76% year‐over‐year. WMP exports (the larger portion of milk powder trade) reflect a more seasonal trend, falling 27% or 4,500 metric tons from the previous month but down just 1% from May 2011. On a year‐to‐date basis, SMP ex‐ports are down 35% while WMP shipments are up 28% or nearly 18,000 metric tons. Venezuela still claims the lion’s share of the product.

URUGUAY With expanding milk production, Uruguay‐

an WMP exports are increasing. In April, WMP shipments totaled just over 7,900 metric tons, the most in a single month since November 2010 and 29% more than in March. SMP, on the other hand, ebbed to a new 20‐month low with just over 700 met‐ric tons heading overseas, 15% less than in April 2011. Press accounts suggest the trend continued through June with dairy export volumes (including cheese and butter) up 30% from the first half of 2011.

BRAZIL Brazilian aggregate milk powder imports

fell to a new 15‐month low in June. SMP im‐ports totaled 1,581 metric tons, down 46% from June 2011 but up 82% from May. WMP exports totaled 3,676 metric tons, up 29% year‐over‐year but down 41% from the previ‐ous month. Aggregated data shows ex‐ports slightly higher for the year so far: through June, SMP shipments were 4% higher while WMP was up 3%.

SOUTH AMERICA

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2007 2008 2009 2010 2011 2012

BRAZIL MILK POWDER IMPORTS

WMP (BF>1.5%) SMPMetric TonsSource: GTIS

0

5,000

10,000

15,000

20,000

25,000

30,000

2007 2008 2009 2010 2011 2012

ARGENTINA SMP AND WMP EXPORTS

All Other Venezuela BrazilMetric TonsSource: GTIS

0

2,000

4,000

6,000

8,000

10,000

12,000

2007 2008 2009 2010 2011 2012

URUGUAY MILK POWDER EXPORTS

SMP WMP (BF>1.5%)Metric TonsSource: GTIS

2009 2010 2011 2012 YTD

Venezuela 25,466 36,163 72,602 32,740

Algeria 41,860 27,912 50,158 17,969

Brazil 31,713 26,735 32,490 12,143

Colombia 325 150 5,110 3,566

Chile 252 492 2,859 2,128

Cuba 550 2,169 4,461 1,750

Dominican Republic 5,567 1,050 2,075 840

Metric Tons Source: GTIS 2012 YTD through May

ARGENTINA WMP EXPORTS


2009 2010 2011 2012

Thailand 50,117 59,357 63,704 9,298

Philippines 112,431 109,874 111,246 36,895

Indonesia 103,801 132,227 127,770 40,080

Malaysia 84,045 87,790 95,777 34,253

China 70,443 88,544 129,869 103,801

Metric Tons Source: GTIS, Thailand YTD May, China YTD Jun,

all others YTD April

SOUTHEAST ASIA SMP IMPORTS

CHINA After increasing in May, Chinese milk pow‐

der imports were lower again in June, though this coincides with the end of the New Zealand milk production season and may simply be a function of supply. Nearly 25,000 metric tons of WMP landed at Chi‐nese ports in June, the least for any single month since December. The total was down 11% from May but up 25% versus June 2011. SMP imports also declined, dipping to the lowest since October at just 10,660 metric tons, down 37% or 6,200 MT month‐to‐month but up 36% year‐over‐year. On a year‐to‐date basis, WMP imports were down 10% or 23,400 tons while SMP was up 61% or 39,500 metric tons.

Whey powder imports, largely supplied by the US and EU, continue to grow as pork production becomes more industrialized. In June, imports totaled 28,400 metric tons, up 22% from June 2011 and pushing the year‐to‐date total to nearly 182,000 metric tons, up 32% from the first half of 2011.

SOUTHEAST ASIA As China import growth slows, Southeast

Asian demand is trending lower. On a year‐to‐date basis through April, imports to the region were 5% lower than in 2011. A look at the individual countries is more muddled—Thai totals are down 22% through May while Philippine imports are down 11% through April (though April itself saw an increase of 35% from the previous month). Indonesian totals were basically unchanged year‐to‐date through April but Malaysia was up 9%.

ASIA

0

10,000

20,000

30,000

40,000

50,000

2008 2009 2010 2011 2012

SOUTHEAST ASIA SMP IMPORTS

Thailand, Philippines, Indonesia, MalaysiaMetric TonsSource: GTIS

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2008 2009 2010 2011 2012

CHINA MILK POWDER IMPORTS


0

10,000

20,000

30,000

40,000

50,000

60,000

2008 2009 2010 2011 2012

CHINA WHEY IMPORTS

EU US WorldMetric TonsSource: GTIS


RUSSIA Russian milk production was 2.6% higher

year‐over‐year in May and up 3.8% year‐to‐date, perhaps explaining declining imports. May SMP imports were down 33% from April at 1,184 metric tons and down 37% year‐over‐year. WMP imports were higher, gain‐ing 47% for the month and 5% from May 2011 but still a minimal amount at just 228 metric tons. This decline has been felt sharpest in the EU—SMP exports to Russia were down 53% year‐to‐date through May.

MIDDLE EAST Middle Eastern WMP demand is rising. In

May, combined EU and New Zealand ex‐ports to the region grew 74% or more than 11,000 metric tons year‐over‐year, 60% of which came from New Zealand. Year‐to‐date, combined exports to the region were up 24% or nearly 23,000 metric tons.

INDIA Weather may soon return as a challenge to

Indian milk production. Monsoon rains are currently running 22% behind normal and already press reports are focused on crops and food prices. In particular, fodder is es‐pecially short in the key dairy producing re‐gions of Karnataka and Maharashtra. The monsoon season has time left for the issue to be alleviated, but if timely rains do not fall, it seems possible that the ban on ex‐ports could return as a way to keep domes‐tic consumer prices in check.

CENTRAL ASIA / MIDDLE EAST

INDIA ACCUMULATED MONSOON RAINFALL ANOMALY

Source: India Meteorological Department Rainfall (mm) from June 1, 2012 through July 24, 2012

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2007 2008 2009 2010 2011 2012

MIDDLE EAST WMP IMPORTS

New Zealand EU USMetric TonsSource: GTISIncludes SaudiArabia, Kuwait, Yemen, Iran, Iraq, Pakistan, Oman, UAE, Syria and Jordan

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2007 2008 2009 2010 2011 2012

RUSSIA MILK POWDER IMPORTS



CURRENCY The Euro has been under intense pressure

in recent weeks, with valuation slipping to two‐year lows and flirting with six‐year lows.

As of July 24, the Euro was at 1.2065 versus the US dollar, down nearly 5% from month‐ago levels and down 7% year‐to‐date.

The New Zealand Dollar has been periodi‐cally under pressure but has managed to bounce off its lows.

The Mexican Peso rallied to close strong in June but has surrendered some of those gains in July. It is down nearly 3% month‐to‐date.

ECONOMIC GROWTH The IMF and other bodies have continued

to downgrade global economic growth pro‐spects as the EU fiscal crisis, a slower China and sluggish performance in the US all drag on performance.

News about China has begun to feature a few brighter notes, with housing prices sta‐ble in June and “Flash PMI” data for July showing improvement. To some, the data points to stimulus efforts — particularly Central Bank interest rate cuts — beginning to work. Others are more cautious, saying that the outlook is for continued downward pressure in the economy.

Several signs point to slower growth in the United States. For example, retail sales were down a surprising 0.5% in June versus May. In addition, earnings reports for the second quarter have revealed a significant number of “misses” on revenue targets — the most, by some accounts, since 2009.

CURRENCY AND ECONOMICS

2012 GDP 2013 GDP Latest CPI

United States +2.1% +2.1% +1.7%

Euro Area ‐0.4% +0.4% +2.4%

China +8.2% +8.5% +2.2%

India +7.0% +7.6% +10.0%

Japan +2.3% +1.5% +0.2%

Brazil +2.0% +4.2% +4.9%

Russia +3.8% +3.9% +4.3%

Source: The Economist, July 21, 2012

THE ECONOMIST MACRO RECAP


Whey markets are mostly un‐changed over the past month both in the US and abroad. Re‐duced availabilities seem to have kept the market largely in balance as the export bid re‐mains unwilling to chase prices higher.

In the US, year‐to‐date whey production is off 1% from last year, or about 2,000 tons. In light of cheese production ris‐ing 3% in the same period, it appears that the migration of whey protein from the base commodities to higher‐valued products continues. In Europe, although cheese returns are more favorable than butter/powder, output is down sea‐sonally, reducing current offer‐ings.

Trade opportunities continue to grow, driven by Asian – and most particularly China’s – ap‐petites. External EU exports are up 22%, or 40,000 tons through May, while US exports are down only slightly. Almost half of the EU increase was destined for China as US ship‐ments there also increased by 3,000 tons (15%).

DRY SWEET WHEY

Europe US Europe US

Q1 765$ 673$ 0.35$ 0.31$

Q2 825$ 589$ 0.37$ 0.27$

Q3 671$ 536$ 0.30$ 0.24$

Q4 564$ 409$ 0.26$ 0.19$

Q1 513$ 362$ 0.23$ 0.16$

Q2 559$ 511$ 0.25$ 0.23$

Q3 722$ 648$ 0.33$ 0.29$

Q4 1,053$ 759$ 0.48$ 0.34$

Q1 1,003$ 850$ 0.45$ 0.39$

Q2 962$ 807$ 0.44$ 0.37$

Q3 921$ 797$ 0.42$ 0.36$

Q4 991$ 823$ 0.45$ 0.37$

Q1 1,325$ 937$ 0.60$ 0.42$

Q2 1,336$ 1,100$ 0.61$ 0.50$

Q3 1,212$ 1,257$ 0.55$ 0.57$

Q4 1,306$ 1,402$ 0.59$ 0.64$

Q1 1,316$ 1,424$ 0.60$ 0.65$

Q2 1,162$ 1,200$ 0.53$ 0.54$

Q3 1,109$ 0.50$

Q4 1,162$ 0.53$

Q1 1,183$ 0.54$

Q2 1,224$ 0.56$

Q3 1,223$ 0.55$

Q4 1,131$ 0.51$

$/Metric Ton $/Pound

2011

2012

2013

Period

2008

2009

2010

$250

$500

$750

$1,000

$1,250

$1,500

2008 2009 2010 2011 2012 2013

DRY SWEET WHEY

Europe US


With falling milk powder mar‐kets, WPC 34 values continue to grind lower. After peaking near $3,400 per ton, WPC 34 prices are off more than 25% from the January highs. Cur‐rently trading near $2,500 per ton, WPC 34 prices have re‐turned to a more traditional $200+ per ton discount to non‐fat dry milk, a first since mid‐2011.

While nonfat markets have firmed, heavy output contin‐ues to weigh on the WPC 34 market. Through May, US WPC 34 output is 5% higher than last year on a daily basis, repre‐senting a gain of about 4,100 metric tons. To compound the market’s woes, end‐users were quick to utilize more economi‐cal nonfat supplies earlier this year, displacing even more WPC 34. The result: manufac‐turers stocks are reported at almost 14,000 tons, 117% or al‐most 7,500 tons higher than a year ago, and now represent more than one month’s pro‐duction. These inventories will take some time to work through, but with nonfat again at a premium to WPC 34, some buyers may again opt for whey protein going forward.

WPC 34 $/Pound

Low Actual High Actual

Q1 2,577$ 1.17$

Q2 2,329$ 1.06$

Q3 1,262$ 0.57$

Q4 894$ 0.41$

Q1 1,175$ 0.53$

Q2 1,225$ 0.56$

Q3 1,398$ 0.63$

Q4 1,771$ 0.80$

Q1 2,031$ 0.92$

Q2 2,041$ 0.93$

Q3 2,104$ 0.95$

Q4 2,190$ 0.99$

Q1 2,424$ 1.10$

Q2 3,245$ 1.47$

Q3 3,380$ 1.53$

Q4 3,189$ 1.45$

Q1 3,353$ 1.52$

Q2 2,884$ 1.31$

Q3 2,425$ 2,639$ 2,822$ 1.20$

Q4 2,315$ 2,888$ 2,976$ 1.31$

Q1 2,315$ 2,961$ 3,086$ 1.34$

Q2 2,315$ 3,067$ 3,197$ 1.39$

Q3 2,315$ 3,038$ 3,197$ 1.38$

Q4 2,205$ 2,787$ 3,252$ 1.26$

2010

2011

2012

2013

Period

$/Metric Ton

2008

2009

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

2008 2009 2010 2011 2012 2013

WPC 34

3‐Year Average


WPC 80 prices are reported as steady with third‐quarter con‐tracts sufficient to meet cur‐rent demand. And, compared to earlier this year where ex‐cess product was almost non‐existent, incremental volumes appear to be more easily sourced with the price premi‐um compared to contracted values falling significantly.

Although supply and demand appear in balance, evidence may suggest that production, which has long lagged de‐mand, is finally catching up. In Europe, output has clearly in‐creased with year‐to‐date ex‐ternal EU exports increasing 60%. In the US, daily produc‐tion has fallen from the De‐cember highs. Indeed, May production was down 12%, or 1,000 tons from December (when total cheese production fell less than 2%). For a largely make‐to‐order product, falling production typically implies declining demand. Moreover, reported manufacturers stocks continue to build, reaching al‐most 9,000 tons in May, a 10% increase from a year ago.

WPC 80 $/Pound


Q1 6,496$ 2.95$

Q2 5,714$ 2.59$

Q3 3,454$ 1.57$

Q4 3,013$ 1.37$

Q1 3,086$ 1.40$

Q2 3,454$ 1.57$

Q3 4,299$ 1.95$

Q4 5,254$ 2.38$

Q1 5,365$ 2.43$

Q2 6,467$ 2.93$

Q3 7,202$ 3.27$

Q4 7,275$ 3.30$

Q1 7,312$ 3.32$

Q2 8,084$ 3.67$

Q3 9,076$ 4.12$

Q4 9,370$ 4.25$

Q1 9,590$ 4.35$

Q2 10,472$ 4.75$

Q3 9,370$ 10,372$ 10,472$ 4.70$

Q4 8,818$ 10,169$ 10,141$ 4.61$

Q1 8,267$ 9,212$ 9,921$ 4.18$

Q2 7,716$ 8,612$ 9,370$ 3.91$

Q3 7,165$ 8,531$ 9,370$ 3.87$

Q4 7,165$ 8,461$ 8,818$ 3.84$

2011

2012

2013

Period

$/Metric Ton

2008

2009

2010

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

2008 2009 2010 2011 2012 2013

WPC 80

3‐Year Average


Following a six‐month slide, whole milk powder prices have found a foot‐hold. After peak‐ing near $3,600 per ton in De‐cember, and losing 20% of its value since, WMP values have moved only slightly in the past month and rest at about $3,000 per ton.

But, GlobalDairyTrade prices suggest potential weakness in the months ahead. With the New Zealand season under‐way, not one contract be‐tween September and January settled above $2,800 per ton at the most recent trade event. However, WMP prices did settle below skim milk powder for the first time since late 2011. With better returns possible by way of SMP pro‐duction, some inbound milk supplies may be diverted from WMP going forward.

For now, global supplies are reported as available with end‐users content with current pricing and supply prospects. A lack of a strong bid from Chi‐na also seems to have calmed the market. Through June, Chi‐na’s import are down 10%, or 23,400 tons from last year.

WHOLE MILK POWDER $/Pound

Europe Oceania US Oceania

Q1 4,548$ 4,575$ 3,799$ 2.08$

Q2 4,500$ 4,506$ 3,733$ 2.04$

Q3 4,017$ 4,054$ 3,770$ 1.84$

Q4 2,835$ 2,560$ 3,296$ 1.16$

Q1 2,269$ 1,892$ 2,461$ 0.86$

Q2 2,495$ 2,119$ 2,558$ 0.96$

Q3 2,754$ 2,283$ 2,645$ 1.04$

Q4 3,694$ 3,342$ 3,193$ 1.52$

Q1 3,422$ 3,204$ 3,233$ 1.45$

Q2 3,601$ 3,804$ 3,431$ 1.73$

Q3 3,610$ 3,293$ 3,591$ 1.49$

Q4 3,731$ 3,508$ 3,729$ 1.59$

Q1 4,539$ 4,187$ 4,000$ 1.90$

Q2 4,409$ 4,042$ 4,313$ 1.83$

Q3 4,182$ 3,652$ 4,361$ 1.66$

Q4 3,941$ 3,567$ 4,158$ 1.62$

Q1 3,682$ 3,563$ 3,734$ 1.62$

Q2 3,208$ 3,031$ 3,269$ 1.37$

Q3 2,955$ 1.34$

Q4 3,036$ 1.38$

Q1 3,283$ 1.49$

Q2 3,549$ 1.61$

Q3 3,547$ 1.61$

Q4 3,465$ 1.57$

$/Metric Ton

2011

2012

2013

Period

2008

2009

2010

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

2008 2009 2010 2011 2012 2013

WHOLE MILK POWDER

Europe Oceania US


After falling by more than 20% between January and June to settle near $2,600 per ton, nonfat and skim milk powder markets are largely un‐changed. The direction of the next move may depend on what corner of the world is be‐ing considered. In the US, pric‐es have firmed as low on‐farm margins – in part due to rising grain costs – curb milk produc‐tion prospects. With a dimin‐ished outlook for powder pro‐duction later this year, futures prices have rallied to almost $3,100 per ton. In New Zealand however, the sentiment por‐tends a more steady outlook. A new season is underway with ideal conditions. SMP prices now exceed whole milk powder, which may attract more milk to SMP in the months ahead. At the most re‐cent GlobalDairyTrade event, low heat SMP averaged just under $2,700 per ton through year‐end.

Demand too, remains a bit of a wild card. In few places are there reports of consumptive demand improving at double‐digit rates. However, trade da‐ta shows aggregate year‐to‐date SMP exports from New Zealand, the EU and the US up 15% through May, or 76,000 tons.

SKIM MILK POWDER $/Pound

Europe Oceania US US

Q1 3,619$ 4,014$ 3,160$ 1.43$

Q2 3,619$ 3,483$ 3,082$ 1.40$

Q3 3,319$ 3,504$ 3,126$ 1.42$

Q4 2,258$ 2,267$ 2,229$ 1.01$

Q1 2,102$ 1,796$ 1,855$ 0.84$

Q2 2,243$ 1,999$ 1,933$ 0.88$

Q3 2,410$ 2,144$ 2,101$ 0.95$

Q4 3,139$ 3,153$ 2,838$ 1.29$

Q1 2,800$ 2,890$ 2,708$ 1.23$

Q2 3,017$ 3,358$ 2,838$ 1.29$

Q3 2,945$ 3,115$ 2,727$ 1.24$

Q4 2,940$ 3,083$ 2,741$ 1.24$

Q1 3,644$ 3,728$ 3,329$ 1.51$

Q2 3,471$ 3,858$ 3,613$ 1.64$

Q3 3,297$ 3,644$ 3,516$ 1.59$

Q4 3,175$ 3,390$ 3,242$ 1.47$

Q1 2,981$ 3,340$ 3,035$ 1.38$

Q2 2,629$ 2,898$ 2,644$ 1.20$

Q3 2,914$ 1.32$

Q4 2,962$ 1.34$

Q1 3,051$ 1.38$

Q2 3,142$ 1.43$

Q3 3,046$ 1.38$

Q4 2,896$ 1.31$

2011

2012

2013

Period

$/Metric Ton

2008

2009

2010

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

2008 2009 2010 2011 2012 2013

SKIM MILK POWDER

Europe Oceania US


With weak skim milk powder fundamentals, casein values continue to push lower. Acid casein prices have tumbled to below $10,000 per ton for the first time since early 2011. At $9,750 per ton however, prices remain about $1,500 higher than what the historical rela‐tionship between SMP and ca‐sein would suggest.

Going forward, lower prices seem almost certain. That out‐come rests largely on New Zealand milk flows between now and January. If pasture conditions hold with plenty of rain‐fall, continued lower pric‐es are likely. If the supply is dis‐rupted somehow and the ca‐sein plants are starved, some firming from current price lev‐els cannot be ruled out.

Prices are delivered to a US port and represent a blended price between European and Oceania suppliers. Trade data confirms that, as the largest import market, US prices are representative of global mar‐kets and similar to other desti‐nations. Caseinate pricing is tied directionally to the under‐lying casein markets.

ACID CASEIN $/Pound


Q1 13,112$ 5.95$

Q2 12,787$ 5.80$

Q3 12,554$ 5.69$

Q4 11,276$ 5.11$

Q1 7,005$ 3.18$

Q2 6,222$ 2.82$

Q3 6,244$ 2.83$

Q4 6,999$ 3.17$

Q1 8,490$ 3.85$

Q2 8,548$ 3.88$

Q3 8,974$ 4.07$

Q4 8,984$ 4.08$

Q1 9,682$ 4.39$

Q2 10,813$ 4.90$

Q3 11,410$ 5.18$

Q4 11,188$ 5.08$

Q1 10,978$ 4.98$

Q2 10,246$ 4.65$

Q3 9,370$ 9,715$ 9,921$ 4.41$

Q4 8,818$ 9,240$ 9,921$ 4.19$

Q1 8,267$ 9,021$ 9,370$ 4.09$

Q2 7,937$ 9,140$ 9,370$ 4.15$

Q3 8,267$ 9,735$ 10,472$ 4.42$

Q4 8,818$ 9,248$ 10,472$ 4.19$

2011

2012

2013

Period

$/Metric Ton

2008

2009

2010

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

2008 2009 2010 2011 2012 2013

ACID CASEIN

3‐Year Average

july 2012 dairy markets worldwide volume 2 • number 5...

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