Irish Farmers' Association Dairy Market Report

1. DAIRY MARKET REPORT
22nd April 2014

2. SUPPLY UPDATE
• Production growth continues apace in the US (+1.0% for Jan/Mar 14 v 13, but slower
at +0.9% for Mar alone), the EU (+4.6% in January) and New Zealand (+6.4 % for the
season to Feb, but +11.8% in Feb. Drought in N Island reported to slow down
March/April supplies)
• Expansion plans by farmers and industry in NZ for next season (whole milk powder
investment)
• Production has rallied in Oz: while season is down 1.4% to Mar, increases since Dec,
and Mar was +3.7%.
• Floods in Argentina have affected main dairy regions badly.
• EU: supplies were rising fast in January, in Germany (+4%), France (+3.5%), the UK
(11.4% for Jan, and unconfirmed 12.1% up for March - NB, UK still expected to finish
the 13/14 year 10% under quota), The Netherland (+5.1%), Poland (+7.3%)
• Wet weather slowed Irish growth: Jan + 2.2%, but Feb - 4.4%
• UK supplies are rising so fast that they are currently exceeding processing capacity
availability -> some distress milk sloshing about (some coming into NI??). “Spot”
milk prices of 26-28ppl (31.6-34cpl) or less mentioned against “going rate” of
around 33-34ppl (40-41.3 cpl)

3. 3

4. 4

5. 5

6. Stocks
• EU APS butter/cheese – Zero
• EU intervention butter/SMP - Zero
• US butter – 80,000t (March 14 – trend up, but
30% less than same time 2013)
• US SMP – 67,000t (Jan 14 – trend up, but 25% less
than same time 2013)
• No info on private stocks, but buyers tend to
operate JIT as much as possible, so private stocks
likely low.
• Chinese stocks reported “healthier” – i.e. less
depleted, which has slowed demand.
6

7. Market developments – China remains crucial
• Chinese demand growth slowing, stocks returning to “healthy” levels
(they were bare till now)
• NZ tariff free quota filled up by April
• Chinese domestic supplies ramping up with spring – but still behind
demand, and likely to remain so for some time
• Forecast demand growth of 8.2% p.a. 2012 to 2017 (increasing
consumption, better distribution networks arising from increasing
urbanisation), forecast supply growth 1.2% p.a. same period.
• 900,000t of shortfall in domestic supplies -> needs to be made up for
by imports, and this is expected to firm up prices in the medium term.
• Forecast from traders: consolidation of global prices around current
levels, possible rebound in market coming up to 2015 because of
continued Chinese demand (due to domestic shortfalls).
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8. Market developments – what about Russia?
• Tension in Ukraine and possible trade sanctions a concern
• Butter and cheese imports from Russia very important for
EU market balance. Massive imports and increases
continue (see below).
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9. Market developments – EU markets
• Supplies well up
• While cream prices holding up (avg EU around €4,100/t),
butter prices have eased (F and D butter around €3,550/t,
Dutch price slightly higher, Irish butter price around
€3,300)
• SMP was more stable at around €3,100, but now easing to
around €3,000.
• Whey prices average around €950, with some lower
reports (€900/t)
• Cheese markets are remaining firmer. Cheddar cheese
markets in the UK are reported firm, with mild around
£3,150/t and mature, depending on origin, up to £500/t
above that.
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10. 10
412
360
324
307
375
355
403 399
104 95
0
50
100
150
200
250
300
350
400
450
1/5/2014 2/5/2014 3/5/2014 4/5/2014
EU AVERAGE DAIRY COMMODITY PRICES
JANUARY 2014 TO 20/04/201
BUTTER
SMP
WMP
CHEDDAR
WHEYPOWDER

11. 11
360
307
355
399
276.4
286.2 287.8
308.2
0
50
100
150
200
250
300
350
400
450
BUTTER SMP WMP CHEDDAR
Europer100kilos
EU V GDT DAIRY PRICES - MID APRIL 2014
EU avg 20/04/2014
GDT 15/04/14

12. GDT auction results – 15/04/14
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Total quantity traded:
36,549 tonnes

13. IDB PPI INDEX
13
Note: a milk price 31.45% above 2010 avg milk price (CSO) would amount to 38.47c/l+VAT

14. 14
RETURNS FROM AVERAGE EU DAIRY COMMODITY PRICES
20TH APRIL 2014
WAS - 30th March 2014
ESTIMATE OF RETURNS FOR REPRESENTATIVE IRISH PRODUCT MIX
Calculations 04/04/14
Avg EU mkt price
at 30/03/14 - €/t c/l equiv
Estimated
coeff.
BUTTER 3650
SMP 3180 44.77 35% 15.67
CHEESE 4000
WHEY PWDR 990 47.11 41% 19.32
WMP 3640 45.15 8% 3.61
OTHER* 38.05 16% 6.09
44.69
ASSUMING THAT "OTHER" RETURNS 15% LESS THAN SMP/BUTTER
NOW - 20th April 2014
ESTIMATE OF RETURNS FOR REPRESENTATIVE IRISH PRODUCT MIX
Calculations 24/04/14
Avg EU mkt price
at 20/04/14 - €/t c/l equiv
Estimated
coeff.
BUTTER 3600
SMP 3070 43.56 35% 15.25
CHEESE 3990
WHEY PWDR 950 46.76 41% 19.17
WMP 3550 44.03 8% 3.52
OTHER* 37.03 16% 5.92
43.86
ASSUMING THAT "OTHER" RETURNS 15% LESS THAN SMP/BUTTER

15. 15
Returns for Irish
SMP/butter = 42.59c/l
before processing
costs
Milk price
equivalent
37.59c/l + VAT
= 39.47c/l incl
VAT

16. BUTTER/SMP and equivalent raw
milk value (Germany)
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17. 17

18. 18

19. Outlook for milk prices in 2014
• Prices to Feb have either increased or stayed static at high
level in all EU
• Some negative price signals in Lithuania, Estonia
• Friesland Campina guaranteed price is to fall by 0.5c/kg
from March
• UK -> main retailers with producer contracts have
increased prices, but all eyes are on Arla price
• Irish prices: current levels comfortably sustainable at
current market returns (mid-late April)
• Some easing likely thereafter. Extent? Timing?
• IFA pushing for peak milk to collect strong milk prices.
19

20. Medium term outlook remains
very good
• Undersupplies continue in China – demand
rising, should continue to underpin trade
and prices
• Uncertainty re. Russia – but if no trade
sanction and/or other crisis related to
Ukraine -> imports continuing to rise
• Strong growth in Irish butter sales in UK,
Germany, Russia and USA
• Powder prices also remaining relatively
strong (though easier)
20

21. New Milk Market Observatory
• Find it here:
http://ec.europa.eu/agriculture/milk-market-observatory/index_en.htm
• Aims to provide EU Commission and operators with uptodate facts and
figures to help with prompt decision making (especially re. market
management measures).
• Same data as was available before, for the moment, but updated more
frequently (not for everything)
• Work in progress, more info will be added.
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