EU dairy output is decreasing in early 2015 in the largest producers, France and Germany, due to the super levy and poor profitability. UK output is growing more slowly at 1.1% as strong sterling damages milk prices and reduces profitability. Overall moderate global dairy output growth is expected in 2015 as drought impacts California and low milk prices contain expansion in other regions like the EU. Dairy markets remain weak due to plentiful global supplies, though butter may find some support from US demand.

1. Dairy Market Report
30th April, 2015

2. EU output easing early
15 due superlevy and
poor profitability
Source: EU MMO

3. Source: EU MMO

4. Supplies down in
largest 2 EU producers
Source: Ornua

5. UK supplies still up, but
more modestly
Source: Ornua

6. 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?

7. Longer term output
trends
Source: EU Commission

8. US production rising
more modestly + 1.1%
for March, forecast
+1.7% for 2015
Source: USDA

9. 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%

10. APS providing continued
market support

11. 61,000T gone into butter
APS since last Oct.
Source: EU Commission

12. 24,000t SMP gone into
APS since last Oct
Source: EU Commission

13. CHEESE APS CLOSED
SINCE LAST SEPT.
Source: EU Commission

14. Butter stock at 35,000t
at end Feb, with
product still coming in.
Source: EU Commission

15. SMP stock at 16,350t by
end Feb, product still
coming in.
Source: EU Commission

16. No more cheese intake,
but stock down to
21,685t by end Feb.
Source: EU Commission

17. Three negative GDT
offset most of earlier
gains
Source: GDT

18. But GDT quantities trend
29% or 148,000t down
Based on: GDT

19. EU commodity prices
holding much better:
Slightly firmer butter and
cheddar cheese prices
Based on EU MMO

20. Ornua PPI up 2.5pts for
March to 100 pts,
equivalent to 30.82c/l
incl. VAT.
Source: Ornua

21. 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

22. International milk prices
Feb 15. EU avg =
€31.88/100kgs (4.2-3.4)

23. Irish milk prices
Source: IFJ

24. Prices have fallen by 7
to 8.6c/l in the last year
Based on IFJ Milk League simple average

25. Based on IFJ Milk League simple average

26. 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…

27. 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

28. 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