PERSPECTIVE October 2018 - The latest insights in global dairy markets Your regular global overview of the dairy industry along with trends in ...
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PERSPECTIVE October 2018 The latest insights in global dairy markets Your regular global overview of the dairy industry along with trends in milk production, commodity prices and dairy trade.
Welcome back to Perspective! October 2018 The end of the year is fast approaching with Spring starting in the Southern Hemisphere and the milk season in New Zealand off to a good start. Speaking of new beginnings, I am delighted to introduce myself as Director NZMP Marketing, taking over the strong legacy of customer focused innovation established by Gillian Munnik. I have spent over 20 years in the co-operative and look forward to applying all my experience to our continued ambition to be the best dairy ingredients and solutions partner. It is always interesting to reflect on how consumers globally perceive our NZ food products. We wanted to share some research we have been reading from NZ academic Dr Nic Lees. There are still lots of unclaimed opportunities to capitalise on positive customer perceptions of NZ food products. If you would like any more information please get in touch with your account manager or email NZMPbrand@fonterra.com This month, I wanted to highlight these four key trends for you: 1. Weather and production – Global weather conditions are lifting feed costs which is impacting margins and already production is starting to slow. Australia production is down and Europe production slowing. Weather in New Zealand has been good and a slight increase in production is anticipated. 2. Exports – Europe exports weakened in May 2018, down -6% compared to May 2017. Rolling 12-month average for Europe is still positive and both New Zealand and USA are showing export growth compared to the same month last year. 3. Imports – China and rest of Asia show continued import growth compared to the same month the previous year, building on strong 12-month growth. 4. Consumer trends – The holiday season is coming up and Blimling anticipates some demand support for butter and cheese in the US. If you have any suggestions for topics you would like to read about in Perspective, or any other general feedback, we would love to hear from you. Kind regards, Alex Turnbull Director, NZMP Marketing
In this issue
Guest feature 4
Global production 6
Fonterra milk collection 7
Global exports 8
Global imports 9
Tracking the global dairy market 10
Global indicators 11
Commodity prices 12
GDT results 13
Industry commentary 14
Glossary 16
3
GUEST FEATURE
The growing appetite for
New Zealand food products
Food products from New Zealand are missing out on
significant premiums in global markets, according
to research by Lincoln University and the University
of Florida.
The research revealed New Zealand’s food exports
were mostly unbranded commodities which entered the
manufacturing or food service sectors.
Food and beverage manufacturers are not taking
advantage of the positive perception of the quality and
safety of food products from New Zealand.
The research from the University of Florida showed most
western consumers view New Zealand food as the next
best thing to their own local products.
Unfortunately, the lack of branding and marketing means
food and beverage manufacturers give away the potential
to take advantage of how consumers see New Zealand’s
food products.
Dr Nic Lees
Senior Lecturer – Agribusiness In Japan, USA and Spain, New Zealand was the second
Management, Lincoln University most trusted source for fresh fruit and vegetables.
Dr Nic Lees is Senior Lecturer in Agribusiness New Zealand has a unique environment
Management at Lincoln University where he teaches
that enables it to produce food
agribusiness strategic management and food marketing.
products with distinct flavours and
Prior to coming to Lincoln he had over 20 years’
experience in a variety of roles in agribusiness including nutritional composition.
senior management, consulting, international sales and
marketing, and the commercialisation of agritechnology. Consumers in the United States rated New Zealand beef
a close second to local beef, while in the United Kingdom,
Nic holds a Horticultural Science Degree with honours New Zealand lamb was seen as just as good as local lamb.
from Massey University and a Master of Business
Administration with distinction from the University While the growing preference for local food is a challenge
of Canterbury. He has completed a PhD at Lincoln for food and beverage manufacturers, there is also a
University in marketing and supply chain management. significant opportunity to use this positive view to capture
greater value.
He has an international reputation for research
on improving the competitive advantage of food When New Zealand products were branded, such as wine
supply chains. Recent research has focused on the and kiwifruit, they captured a significant premium.
identification and marketing of New Zealand food
The price per litre of New Zealand wine is second only
exports in international markets
to France, and kiwifruit exports are sold at a significant
He has presented his research at international conferences premium over Italian or Chilean products.
in Europe, China, the United States and New Zealand. He
has been published in international academic journals and If New Zealand can replicate this with other food
is also a regular media commentator. exports, then it can move away from the current focus on
increasing the volume of agricultural products and focus
instead on increasing value.
4 NZMP PERSPECTIVE October 2018
New Zealand has a unique environment that enables characteristics, yet little research has been done on the
it to produce food products with distinct flavours and health impacts of this.
nutritional composition. The country has high sunshine
Food marketed on health attributes command very high
hours, elevated UV light levels, moderate climate and
premiums over commodity products. Manuka honey and
young soils. These all have a positive impact on what
A2 milk are clear examples of this.
it produces.
To capture these premiums, all of us in New Zealand need
No other country had this combination of environmental
to invest significantly more in understanding the distinct
characteristics. characteristics of the country’s agricultural products, and
Despite this, there has been little research done on how food and beverage manufacturers communicate this
identifying the impacts of this on the flavour, texture and to consumers.
health characteristics of New Zealand-produced food. This will take time and require collaboration between
For example, research has shown that New Zealand- food exporters, government, universities and research
grown avocados have unique nutritional qualities, with institutes. However, the opportunity exists now to make
double the amount of vitamin B6 and 20 percent more the most of the New Zealand’s positive reputation in the
folate than those grown in other countries. eyes of overseas consumers. Some food and beverage
manufacturers are capturing value from New Zealand-
We also know that New Zealand grass fed beef and dairy labelled products but many consumers remain unaware
products have lower saturated fats and other nutritional that their food originated in New Zealand.
Disclaimer: The views expressed above are the opinion of the author, not those of Fonterra,
and Fonterra is not responsible for any decisions taken in reliance on the same. 5
GLOBAL PRODUCTION
Early season production in
New Zealand stronger than last
year. Production down in Australia
and slowing in Europe
To view a summary of year-on-year changes in production click here
NEW ZEALAND AUSTRALIA EUROPEAN UNION UNITED STATES
0 % +2% +3% +1%
Production change Production change Production change Production change
the 12 months the 12 months the 12 months the 12 months
to August 2018 to July 2018 to July 2018 to August 2018
For the 12 months to Production for the Production for the Milk production for the
August, milk production was 12 months to July was up 12 months to July was up 12 months to August
flat compared to the same +2% compared to the same +3% compared to the same increased by +1% compared
period last year. period the previous year. period the previous year. to the same period last year.
Total New Zealand milk The likelihood of an El Niño Growth for the month of US milk production was up
production increased developing remains at July was predominantly +1% in August compared to
+5% in August compared 50% which will continue to driven by Germany, France the same period last year.
to the same month last pressure milk production and Spain up +3%, +2% Hot and humid weather
year although it is still throughout the season. and +4% respectively but conditions had the potential
early in the season. This weekly production figures to slow growth but August
Australian milk production
was driven by favourable for Germany and France milk production remained
decreased -4% in July
weather conditions in in August are showing around last year’s level. An
compared to the same
Taranaki, Central Districts, negative growth year increase in cow numbers
period last year. This is being
Canterbury and Southland/ on year. regardless of heavy
driven by rising on-farm
Otago. Some of this slaughter rates sets the US
input prices, droughts across EU milk production
increase has been offset as up to meet expected annual
parts of the country and increased by less than
a result of heavy rains in the growth of +1%.
cow cull rates increasing (up +1% in July compared to
Bay of Plenty.
+14% in July, year-on-year). the same period last year
as conditions became
more favourable.
Sources: Data from Global Trade Information Services and from government and
industry websites, including USDA, Eurostat, High Ground Dairy, Dairy Australia and
Dairy Companies Association of New Zealand
6 NZMP PERSPECTIVE October 2018
FONTERRA MILK COLLECTION
FONTERRA NEW ZEALAND MILK COLLECTION 2018/2019 SEASON
100
VOLUME (M LITRES/DAY)
80
60
40
20
2018/19
2017/18
0
JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY 2016/17
NEW ZEALAND AUSTRALIAN
COLLECTION COLLECTION
+4% -8%
Increase for the season Decrease for the season from
from 1 June to 31 August 2018 1 July to 31 August 2018
Fonterra’s early season Fonterra’s milk collection
milk collection across across Australia for the
New Zealand for the three two months to 31 August
months to 31 August reached 17 million kgMS,
reached 127 million kgMS, down -8% on the same
around 8% of total period last season.
season production.
Poor seasonal conditions
New Zealand collections in are driving up input costs
August reached 97 million resulting in increased
kgMS, +3% up on the same cow cull rates. The poor
month last season. seasonal outlook and a very
competitive milk supply
These volumes are small
market will more than
in the context of the full
likely continue to impact
season, as is usual for this
milk supply during the 2019
time of the year.
financial year.
Sources: Fonterra Global Dairy Update, September 2018
7
GLOBAL EXPORTS
Export growth from New Zealand
and the US in July. European
exports weakened in May
To view a summary of year-on-year changes in exports click here
NEW ZEALAND AUSTRALIA EUROPEAN UNION UNITED STATES
-2% +5% +4% +10%
Export change Export change Export change Export change
for the 12 months for the 12 months for the 12 months for the 12 months
to July 2018 to July 2018 to May 2018 to July 2018
Exports for the 12 months Exports for the 12 months Exports for the 12 months Exports for the 12 months
to July were down -2%, or to July were up +5%, or to May were up +4%, to July were up +10%,
-57,000 MT, on the previous +33,000 MT, on the previous or +220,000 MT, on the or +218,000 MT, on the
comparable period. This comparable period. previous comparable period. previous comparable period.
continues to be driven Continued upside in SMP
Fluid and fresh dairy, and This increase was driven
by lower volumes across and infant formula remain
infant formula continued by growth across the five
WMP, AMF, cheese and the primary drivers behind
to make up the majority largest export categories,
SMP, down a combined European dairy export
of growth in Australian SMP, lactose, cheese, whey
-116,000 MT. Fluid and fresh growth, up a combined
exports, up a combined powder and WPC and WPI,
dairy and infant formula +222,000 MT.
+45,000 MT. up a combined 185,000 MT.
continued strong growth,
EU dairy exports decreased
up +76,000 MT. Australian dairy exports US dairy exports increased
by -6%, or -28,000 MT,
increased +4%, or +2,000 by +12%, or +20,000 MT, in
Total New Zealand dairy in May compared to the
MT, in July compared to the July compared to the same
exports increased +6%, same period last year. This
same period last year. This period last year. Growth
or +17,000 MT, in July was primarily driven by
growth was due to upside in in SMP and lactose of a
compared to the same declines in fluid and fresh
most categories, up +10,000 combined +17,000 MT, was
period last year. This dairy and SMP, down a
MT, offset by declines the primary driver behind
increase is driven by WMP combined -30,000 MT.
in butter, SMP, cultured this increase.
and butter, up a combined This was partially offset by
products, other powders
+32,000 MT. However, gains in infant formula, up
and caseinate of a combined
declines in SMP of -16,000 +6,000 MT.
+8,000 MT.
MT dampened this increase.
Sources: Data from Global Trade Information Services, US Dairy Export Council, EU Milk
Market Observatory, Dairy Australia, High Ground Dairy and Eucolait
8 NZMP PERSPECTIVE October 2018
GLOBAL IMPORTS
Imports in Asia show continued strong
demand. Middle East and Africa remain
flat while Latin America declines
To view a summary of year-on-year changes in imports click here
LATIN AMERICA ASIA MIDDLE EAST CHINA RUSSIA
& AFRICA
-1% +2% +4% +17% +5%
Import change for Import change for Import change for Import change for Import change for
the 12 months to the 12 months to the 12 months to the 12 months to the 12 months to
May 2018 May 2018 May 2018 March 2018 May 2018
Imports for the 12 Imports for the 12 Imports for the 12 Imports for the 12 Imports for the 12
months to May were months to May were months to May were months to March were months to May 2018
down -1%, or -25,000 up +2%, or +102,000 up +4%, or 148,000 up +17%, or +394,000 were up +5% or
MT, compared to MT, compared to MT, compared to MT, compared to the +55,816 MT compared
the same period the the same period the same period the same period last year. to the same period
previous year. This the previous year. previous year. The Strong demand out the previous year.
decline was primarily Continued growth increase is driven of China continued
This was mainly
driven by WMP in WMP and cheese by growth in SMP, with imports across
driven by an increase
and AMF, down a of +96,000 MT were cheese and fluid all key categories
in fluid and fresh
combined -88,000 the primary drivers of and fresh dairy, up for the period.
dairy and cultured
MT. An increase this upside. up a combined Infant formula, WMP
products of +43% and
in SMP and whey +125,000 MT. and SMP imports
Asia (excluding China) +21% respectively.
powder of +62,000 added a combined
dairy import volumes¹ Middle East and
MT offset some of +220,000 MT of Russia import volumes
increased +3%, or Africa dairy import
the decline. additional volumes. were up +25% or
+12,000 MT, in May volumes¹ were mostly
+25,405 MT for May
Latin American dairy compared to the flat in May compared China dairy import
2018 compared to the
import volumes¹ same period last year. to the same period volumes² increased
same month last year.
decreased -5%, or Growth in fluid and last year. This was +3%, or +7,000 MT,
-8,000 MT, in May fresh dairy and SMP driven by strong in March compared
compared to the of +22,000 MT drove growth in WMP of to the same period
same period last the increase. A decline +10,000 MT, offset last year. This was
year. This decrease in whey powder of by declines in fluid driven by a combined
was driven by cheese, -7,000 MT partially and fresh dairy of +14,000 MT, or +22%,
SMP and AMF down dampened gains. -12,000 MT. growth in fluid and
-13%, or -12,000 MT. fresh dairy, butter and
This was partially lactose categories.
offset by gains in Declines in WMP of
WMP and lactose, -6,000 MT partially
up +3,000 MT. offset this growth.
1 Estimates are included for those countries that have not reported import data.
2 China has suspended trade data, citing system technical issues. Based on exports to China, we estimate June volumes grew
15% compared to the previous comparable period.
Sources: Data from Global Trade Information Services; EU Milk Market Observatory; FAO; Highground Trading Group
9
TRACKING THE GLOBAL DAIRY MARKET
Global Dairy Market PRODUCTION
The charts on the right 1000
illustrate the year-on-year
800
changes in imports, exports
LIQUID MILK (M LITRES)
and production for a range
600
of countries that are
important players in global
400
dairy trade.
The absolute size of 200
the bars represents the
change in imports, exports 0
or production, relative
to the same period the -200
SEP ‘17 OCT ‘17 NOV ‘17 DEC ‘17 JAN ‘18 FEB ‘18 MAR ‘18 APR ‘18 MAY ‘18 JUN ‘18 JUL ‘18 AUG ‘18
previous year.
NEW ZEALAND EU27 UNITED STATES AUSTRALIA AVERAGE
Averages are shown where
NOTE: Data for EU and Australia to July; New Zealand and US to August.
data is complete for the
regions presented.
EXPORTS
For further information
120
click here
90
60
MT (000s)
30
0
-30
-60
AUG ‘17 SEP ‘17 OCT ‘17 NOV ‘17 DEC ‘17 JAN ‘18 FEB ‘18 MAR ‘18 APR ‘18 MAY ‘18 JUN ‘18 JUL ‘18
NEW ZEALAND EU27 UNITED STATES AUSTRALIA AVERAGE
NOTE: Data for EU to May; New Zealand, US and Australia to July.
IMPORTS
160
120
80
MT (000s)
40
0
-40
-80
JUN ‘17 JUL ‘17 AUG ‘17 SEP ‘17 OCT ‘17 NOV ‘17 DEC ‘17 JAN ‘18 FEB ‘18 MAR ‘18 APR ‘18 MAY ‘18
ASIA CHINA MIDDLE EAST & AFRICA LATIN AMERICA RUSSIA AVERAGE
NOTE: Data for Asia, Middle East and Africa and Latin America to May; estimates for China for April and May.
Source: Government milk production statistics/GTIS trade data/Fonterra analysis
10 NZMP PERSPECTIVE October 2018GLOBAL INDICATORS
Food Price
FAO Food Price Index averaged 199.1 points in August 2018, unchanged from previous month
and down -5.4% on the corresponding month last year. The Dairy Price Index averaged 196.2
points in August 2018, down -1.5% on previous month. International price quotations of butter,
skim milk powder and whole milk powder fell for a second month, whilst cheese rebounded
marginally. This downward trend reflects a seasonal decrease in market activities, as well
as uncertainty surrounding future export availability: Droughts could impede production in
Europe and Australia whilst New Zealand forecasts for the season have lifted.
Source: FAO
Economic
Composite leading indicators (CLIs) are pointing towards easing growth in the
OECD area overall. Easing growth momentum is anticipated in large European
countries including the United Kingdom, Germany, France and Italy. Stable growth
momentum is forecast for the United States, Canada and Japan. Among major
emerging economies, growth is gaining momentum in China (industrial sector)
and India, however, easing of growth is anticipated in Brazil and Russia.
Source: OECD
Consumer
The Argentinian peso weakened sharply against the dollar in late August. Economist Intelligence
Unit forecasts a lengthening recession and deep contraction for GDP, of -2.2%, in 2018, with very
weak growth in 2019, of +0.3%. Turkey is facing a currency crisis. Revised short-term real GDP
growth outlook for 2018 is +3.1% (from +4%) and for 2019 to +1% (from +4.6%). South Africa’s real
GDP growth for 2018 was also subject to downward revisions, now +0.9% (from +1.5%) due to
domestic and global headwinds. Growth should rebound to +1.8% in 2019. The risk of a full-blown
emerging-market crisis has been revised down, now a moderate 21‑30% likelihood of the event
occurring in the next two years, as few countries share the characteristics of Argentina and Turkey.
Source: Economist Intelligence Unit
Weather
A heatwave in the Northern Hemisphere and drought in Australia has led to feed costs
soaring. In the New Zealand Herald, Rabobank analyst Emma Higgins commented this
is having a big impact on feed costs. Straw wheat in England, which usually sells at £35/
tonne, is now going for closer to £100/tonne. Increases in prices are also occurring in the
German, French and Australian markets. Lifting feed costs are impacting margins and
already production is starting to slow. Weather in New Zealand has been good and a
slight increase in production is anticipated.
Sources: New Zealand Herald, Scoop, Climate Prediction Centre, World Agricultural Weather Highlights USDA oCOE
11COMMODITY PRICES
WMP
$4000 September prices changes for WMP were mixed. Dutch
Dairy Board prices rose +2.4% to USD 3,290/MT. GDT prices
$3500 decreased -5.0% to USD 2,851/MT. USDA Oceania prices
were not available at time of update.
$3000
Forecasts and futures were mixed. NZX Futures’ average
$2500 price during the six month forecast period decreased -2.5%
to USD 2,799/MT Rabobank Oceania predicted to remained
$2000
flat in price at 3,100/MT , while Informa Oceania predicts an
$1500 increase of +1.0% go USD 3,106/MT.
Mar 18
Apr 18
May 18
Jun 18
Jul 18
Aug 18
Mar 19
Sep 18
Oct 18
Nov 18
Dec 18
Jan 19
Feb 19
SMP
$4000
SMP price changes for September were all mostly positive,
$3500 with GDT prices increasing +2.2% to USD 2,027/MT, Dutch
Dairy Board also increased by +3.8% to USD 1.739/MT and
$3000 USDA NASS also up +4.5% to USD 1,870/MT.
$2500 USDA Oceania prices were not available at time of update.
Forecast/futures are pricing are similar to the current market
$2000
with prices between USD 2,000/MT and USD 2,174/MT.
$1500
Mar 18
Apr 18
May 18
Jun 18
Jul 18
Aug 18
Sep 18
Oct 18
Nov 18
Dec 18
Jan 19
Mar 19
Feb 19
BUTTER
Butter prices were mostly negative for September. GDT
$6000
prices decreased -7.0% to USD 4,275/MT, Dutch Dairy
$5500
Board down -1.2% to USD 6,263/MT and CME Spot
$5000
decreased -2.5% to USD 4,946/MT. USDA Oceania prices
$4500
were not available at time of update.
$4000
$3500 Average futures and forecasts for October to March 2019
$3000 are relatively stable with CME Futures, Informa Oceania,
$2500 NZX Futures, Rabobank Oceania average prices over the
$2000 6 months at USD 5,041/MT, USD 3,989/MT, USD 5,495 and
$1500
USD 5,300/MT respectively.
Mar 18
Apr 18
May 18
Jun 18
Jul 18
Aug 18
Sep 18
Oct 18
Nov 18
Dec 18
Jan 19
Mar 19
Feb 19
CHEESE
$8500 Cheddar cheese prices stayed flat during September
$7500
with GDT at 3,631/MT and CME spot at 3,613/MT. USDA
Oceania and EU commission prices were not available at
$6500
time of update.
$5500
Cheese Futures and forecasts pricing are mixed. CME
$4500
Futures prices decreased for the six months from October
$3500 to March 2019, down -1.6% to an average price of USD
$2500 3.593/MT. Informa Oceania averages USD 3,498/MT and
$1 50 0 Rabobank averages USD 3,600/MT.
Mar 18
Apr 18
May 18
Jun 18
Jul 18
Aug 18
Sep 18
Oct 18
Nov 18
Dec 18
Jan 19
Mar 19
Feb 19
Actuals Forecasts
GDT Fonterra Dutch Dairy Board USDA Oceania NZX Futures CME Futures
USDA NASS CME Spot EU Commission Rabobank Oceania Informa Oceania
Source: https://www.globaldairytrade.info/en/product-results/
12 NZMP PERSPECTIVE October 2018GDT RESULTS
TRADING EVENT 220
-1.6 %
usd 2,959 38.4 000/mt
Change in Fonterra’s weighted average Fonterra’s weighted average Fonterra product quantity
product price from previous event product price (USD/MT) sold on GDT
WMP AMF SMP BUTTER
-1.9% -0.4% -1.2% -0.0%
$2,768 $5,294 $1,989 $4,270
RENNET CASEIN BMP CHEDDAR LACTOSE
+1.8% Not offered
at this event
-3.5% Not offered
at this event
$5,421 $3,503
GDT SALES BY DESTINATION
TRADING EVENT 220 Latest Auction Financial Year to Date
North Asia (including China) Latin America
South East Asia Other
38,438 140,997
Middle East and Africa
MT MT
The next trading event will be held on 2 October 2018.
Visit www.globaldairytrade.info for more information.
GDT PRICE INDEX
TRADING EVENT 220
The New Zealand dollar fell
PRICE INDEX
over the month of August
after the Reserve Bank New
Zealand signalled a lower-
for-longer stance on interest
rate policy. US-China trade
war talk presents a key risk
event during September.
GDT PRICE INDEX NZD/USD SPOT RATE
Source: https://www.globaldairytrade.info/en/product-results/
13INDUSTRY COMMENTARY
USDA, Dairy Outlook
Published 18 September 2018
Recent developments This is in part a trade mitigation package to assist farmers
adversely affected by recent trade actions of foreign
Milk production for July 2018 increased just +0.4% on July 2017. countries and includes revenue protection programmes and
Milk cow numbers are down 800 and milk per cow increased government contracts for liquid milk, amongst other things.
less than +0.01% compared to same month last year. Low
growth in milk production is in part due to strengthening feed Dairy forecasts for 2018
prices and relatively low milk prices, compounded by heat
Milk production forecast is 217.8 billion pounds (98.8mMT),
stress with higher than average temperatures in June and July.
down -0.1 billion since last month. Annual forecast milking
National Dairy Products Sales Report (NDPSR) showed herd for 2018 has been lowered to 9.4 million head, down
price increases across the board, particularly for cheddar -5,000 and milk-per-cow forecast is unchanged.
cheese. U.S. domestic prices high skim-solids products have
Import forecast (on a milk-fat basis) has been raised to 6.2
been converging with foreign export prices in recent months.
billion pounds for the year (2.8mMT), +0.2 billion more than
July 2018 exports on a milk-fat basis were 883 million last month’s forecast, because of higher butter and cheese
pounds, up compared to year ago but down compared to imports in July. Export forecast has been decreased slightly
last month. Exports on a skim-solids basis total 3.503 billion to 10.3 billion (4.7mMT). Domestic use forecast on a milk-
pounds, up compared to year ago but down on last month. fat basis has been raised again, up +0.2 billion pounds to
Tariffs contributed to decrease of cheese exports to Mexico 212.6 billion (96.4mMT).
and whey exports to China. Cheese exports to Mexico fell
Import forecast (on a skim-solids basis) has been raised
-12 million pounds and total decline was -15 million pounds.
slightly to 5.7 billion pounds (2.6mMT), with higher expected
Whey product exports to China declined -8 million pounds
imports of cheese and other products. Export forecast
but declined -14 million pounds overall.
has been reduced to 44.7 billion pounds (20.3mMT), -0.7
Imports on a milk-fat basis were 574 million pounds, slightly billion pounds lower than last forecast. This was driven by
up compared to year ago and previous month. Imports on a a decline in whey product exports which are not expected
skim-solids basis, were 504 million pounds, down compared to recover. Higher domestic use is forecast at 178.6 billion
to July 2017 but a slight increase month on month. Cheese pounds (81mMT), up +0.2 billion pounds, which will make
and butter imports were high, with butter the highest since up for some but not all the lost exports, leading to an
May of 2004. increased ending stocks forecast up +0.5 billion pounds.
USDA has recently announced several programmes and Dairy price forecasts for 2018 have been raised, based on
legislations targeted at supporting domestic dairy industry. recent movements with the exception of butter.
Dairy forecasts for 2019
Milk production is projected at 221.0 billion pounds Imports on a skim-solids basis are forecast slightly higher
(100.2mMT) for the year, an increase of 0.1 billion since last at 5.6 billion pounds. Exports are down, at 44.1 billion
forecast and driven by forecasts of higher milk price and pounds. Continuing strength in the economy means
lower feed prices. Annual forecast milk cow numbers for domestic use is now forecast at 181.5 billion pounds. Ending
2018 are expected to grow slightly to 9.4 million and milk- stocks are now forecast at 10.8 billion pounds, +0.3 billion
per-cow forecast is unchanged. more than forecast last month.
On a milk-fat basis, forecast for imports is 6.0 billion Dry whey and NDM prices have been raised as tight supply
pounds for 2019, +0.4 billion up as strength in butter and and current price strength are expected to continue into
cheese imports is expected to continue. Export forecast has 2019. Cheese prices are unchanged and butter has been
been lowered to 9.8 billion pounds, -0.1 billion less than last lowered slightly.
month. Ending stocks are unchanged at 12.5 billion pounds.
Domestic use raised again to 216.9 billion pounds, +0.3
billion pounds higher than last month.
Sources: USDA
14 NZMP PERSPECTIVE October 2018INDUSTRY COMMENTARY
Blimling, Forecast Update
Published 5 September 2018
Blimling notes that with Halloween and Christmas coming Cheese prices should be supported by strong domestic
up, marketers are encouraging holiday demand with lots demand and limited excess milk but could be derailed by
of promotions. Chunk cheese promotions usually rise 10% aggressive promotional activity. Butter prices are expected
percent between September and October, and another to rise seasonally with increasing demand but ample
10% in November. Butter demand looks strong with inventories and lots of cream limiting upside. NDM/SMP
promotional growth yet to come in Thanksgiving week prices slowly recover with stronger demand tempered by
(promotions increased near threefold last Thanksgiving ample inventories and buyer price sensitivity. In the whey
week). Weak pricing could spur greater promotional activity market, strong demand and tight supply should support
and a surge in sales. prices in the near term, but new capacity and market
dynamics should alleviate pressure.
Sources: Blimling
15GLOSSARY
Fonterra draws the information in this update from a variety
of principally external sources listed below. Also included are
defined acronyms for better understanding.
AMF Anhydrous Milk Fat IMF International Monetary Fund
BMP Butter Milk Powder Informa Informa Economics Inc., Dairy
Group, Global Dairy Market Report
CME Chicago Mercantile Exchange
LME Liquid Milk Equivalent
DDB Dutch Dairy Board
MAT Moving Annual Total (this is data
EIU Economist Intelligence Unit averaged across the 12 month period)
FAO United Nations Food and MEA Middle East and Africa
Agriculture Organisation
NDM Non-fat Dry Milk
Farmgate Milk Price The price for
NZX NZ Stock Exchange
milk supplied in New Zealand to
Fonterra by farmer shareholders OECD Organisation for Economic
Co‑operation and Development
Fluid and Fresh Dairy The Fonterra
grouping of fluid milk products (skim Q[1] [First] Quarter
milk, whole milk and cream pasteurised
Reference Products The dairy products
or UHT processed), concentrated
used in the calculation of the Farmgate
milk products (evaporated milk and
Milk Price, which are currently WMP,
sweetened condensed milk) and yoghurt
SMP, BMP, butter and AMF
FTA Free Trade Agreement SEA South East Asia
GDI Global Dairy Intelligence group, Season New Zealand: A period of
Fonterra Cooperative Group Limited. 12 months to 31 May in each year.
GDI provides insights to Fonterra Australia: A period of 12 months
management based on a model of the to 30 June in each year
global dairy market developed by GDI
and populated with publicly available SMP Skim Milk Powder
data. The model outputs referenced TE GDT Trading Event
in this report do not reflect Fonterra’s
non-public production or sales data USDA NASS US Department of
Agriculture National Agricultural
GDP Gross Domestic Product Statistics Service
GDT Global Dairy Trade auction platform USDA Oceania US Department of
Agriculture Agricultural marketing
GDT Price Index is an index that
service price series for specific
provides a measure of the weighted
products in the Oceania region
average percentage change in the
movement in price of all products WMP Whole Milk Powder
sold on GDT. This provides a simple
YOY Year-on-year
measure of changes in dairy price
between trading events YTD Year to date
16 NZMP PERSPECTIVE October 2018REFERENCES
Tracking the global dairy market Production, Export
and Import charts
The production, export and import charts illustrate year-on-year changes in production,
exports and imports for a range of countries that are important players in global dairy trade.
The absolute size of the bars represents the change in production, exports or imports
compared to the same month the previous year. The portion of the bar below zero represents
a year-on-year decrease and the portion above the line shows the year increase for that
country. Where countries are not shown this is likely due to the data not yet being available.
Weather Source (Page reference – 11)
Comments on weather are obtained from various government weather sites as well as
independent reports including Martell Crop Projections. Global milk production data is
sourced from government and industry websites including US Department of Agriculture
(USDA), EuroStat, Dairy Australia, Dairy Companies Association of New Zealand (DCANZ)
and others.
17Important note: The information and commentary contained in this ‘Perspective from NZMP’ is based on publicly available official government statistics; industry association reports; other published industry reports together with data and insights developed by Fonterra’s Global Dairy Intelligence group (‘GDI’). These sources are identified as appropriate in this ‘Perspective from NZMP’. GDI insights and data are derived from a global dairy market model populated by publicly available data. The model inputs and outputs do not reflect Fonterra’s non-public production, pricing or sales data. Fonterra Co-operative Group Limited and its group members involved in the manufacture or sale of NZMP branded products (‘Fonterra’) has provided this ‘Perspective from NZMP’ for informational purposes only. It does not constitute recommendations or advice for the purposes of making financial decisions regarding trading in dairy products or commodities, or dealing in financial instruments relating to dairy commodities. Although every effort is made to ensure the accuracy of reproducing and interpreting such information, no warranty or representation of such is made and Fonterra shall have no liability in respect of any reliance placed on such information in the formulation of any business decision.
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