dairy market report
TRANSCRIPT
Latest reports EU output in April 2015
• Lower than same time last year output reported since end of quotas in:• France• Germany
• Longer term, greatest in production expected in Germany and Netherlands, as well as Ireland.
• UK output growing much slower: +1.1% for 2 weeks to 18th April 2015 yoy. Strong sterling damaging milk price – lack of profitability.
• Ireland: anecdotal reports that production is up in most co-ops.
• “Wall of milk”? Or small increase due to lack of profitability?
Oceanian supplies still rising to Feb 15 – more slowly for NZ
Source: Dairy Australia, EU MMO
Feb 15 + 6.4%
Source: DCANZ NZ: +3.2% season to end Feb.Feb 2015
-4.9%
EU commodity prices holding much better: Slightly firmer butter and cheddar cheese prices
Based on EU MMO
Returns slightly easier, no change in April Irish butter and SMP prices
19th April 2015 19th April 2015
Calculations at 28/04/15
Avg EU mkt
price at
19/04/15 - €/t
Trend re
prev wk c/l equiv
Estimated
coeff. Calculations 28/04/2015
Avg EU mkt price
at 19/04/15 - €/t
Trend
re
prev
wk c/l equiv
Estimated
coeff.
BUTTER (Irish) 3140 BUTTER 3210
SMP (Irish) 2130 33.06 35% 11.57 SMP 1980 32.02 35% 11.21
CHEESE 3220 CHEESE 3220
WHEY PWDR 900 38.56 41% 15.81 WHEY PWDR 900 38.56 41% 15.81
WMP 2660 32.99 8% 2.64 WMP 2660 32.99 8% 2.64
OTHER* 28.10 16% 4.50 OTHER* 27.22 16% 4.35
34.52 34.01
ASSUMING THAT "OTHER" RETURNS 15% LESS THAN SMP/BUTTER ASSUMING THAT "OTHER" RETURNS 15% LESS THAN SMP/BUTTER
ESTIMATE OF RETURNS FOR REPRESENTATIVE IRISH PRODUCT MIX ESTIMATE OF RETURNS FOR REPRESENTATIVE IRISH PRODUCT MIX
WITH IRISH PRICES FOR BUTTER AND SMP (GROSS RETURNS, BEFORE DEDUCTION OF PROCESSING COSTS)
Based on EU MMO
Glanbia price commitment creates level of price stability through early peak
• March milk price• Base = 29.5c/l incl VAT (28.04+VAT) + 1c/l from stability fund
(2014) (VAT part of 1c/l?)• I.e. unchanged total payout of 30.5c/l incl VAT (28.99c/l +
VAT)
• Commitment for April/May• Payout unchanged (unless major market disaster) at 30.5c/l
incl VAT• Base may vary• Top up from fund to compensate• Some/all of the topup may need to come from new support
fund (to be voted on by shareholders in May)
• Another pressure for price stability through early peak: farmer mobility…
Outlook for output?
• EU: Uncertainty about milk supply post quota, but some evidence early output lower. Strong growth expected in certain countries. Other regions output constrained due to low milk prices
• UK: Cow numbers have grown over the past year (mainly NI), indicating output levels could be maintained in short-run despite poor Stg milk prices. Fewer replacement heifers in the system
• US: Concerns growing over impact of California drought. This, combined with weak milk prices should contain overall output levels, Culling up 3% yoy in 2015 . Forecast for year +1.7%.
• NZ: Output up 3.2% to end Feb with a forecast of +0,2% for season to end May, early drying-off (drought & milk price ) expected to impact on Mar-May flows
• Summary: Moderate growth expected in US due to Californian drought. EU suppliers may limit expansion in light of falling returns as milk pricing comes under pressure post quota
Outlook for markets?
• Cheese: Weak € & good domestic demand + increased drying capacity in UK are positives for EU against a background of lower output, but need for ‘short-buyers’ to re-engage to prevent further weakening
• SMP: Expectations of plentiful supply ex. EU & US continues to dampen buyer sentiment
• WMP: Increased supply volumes have encouraged buyers to hold-off. Further price weakness expected through out Q2
• Butter: Outlook unclear, mixed indications. US demand/pricing will provide some support. Overall market dynamic depends on extent of Q2 supplies in EU