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Dairy Market Headlines
•  GDT Rises 12.7%
•  EU Milk Production Fell Short of Previous Year
•  US Nation Milk Producers Federation ask for Government Assistance
•  Whey Heats Up – Especially High Protein
•  U.S. Cold Storage Report Up Again

GDT Rises 12.7%
•  August 16th GDT rose 12.7% higher than the previous event, the largest increase since September 2015. All products were positive – with highlights being butter up 14.1%, cheddar cheese up 8.9% and WMP up 18.9%.
•  The primary driving factors being Whole Milk Powder, which was driven by Fonterra’s announcement that they would be reducing the WMP that they will bring to the GDT auction in the upcoming year. This caused buyers to jump on product now to avoid future supply constraints.
•  CME dairy futures responded energetically in response to such a positive GDT auction, but spot dairy markets remained flat.

Source: Global Dairy Trade (GDT)

EU Milk Production Fell Short of Previous Year
•  June output was down 1.6% in the EU. This is the first decrease since March 2015.
•  Germany and France (two of the EU’s largest producers) were down 1.5% and 3.3% respectively.
•  Smaller EU countries such as Ireland are still planning large herd expansion, though this should not be enough to stop this apparent downward production trend.
•  Netherlands upcoming phosphorus limits should contract milking herd size as well.
•  In the week ending August 7th, butter prices rose 4.3% from the prior week. This could be attributed to slower EU milk output.

U.S. Nation Milk Producers Federation ask for Government Assistance
•  Nation Milk Producers Federation and the American Farm Bureau Federation have reached out to the Secretary of Agriculture to enact the purchasing of cheese and distributing it to impoverished U.S. citizens.
•  The request asked for 90 million pounds of cheese to be purchased by the U.S. government for $150 million.
•  Fluid milk sales dropped 1.4% YOY in June.
•  Opponents have cited rising cheese prices since May 2016 as reason not to have government intervention, but farmers are still struggling and inventories are still burdensome.
•  Secretary of Agriculture announced $11.2 million of aid for U.S. farmers enrolled in the Margin Protection Program for Dairy.

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Whey Heats Up – Especially High Protein
•  With U.S. WPC 80 exports at an all-time high at the end of June, WPC 80 seems to be ready for higher prices going into the end of 2016. According to the GTIS – the average June 2016 export price was $3.60.
•  While WPC 80 stocks were higher earlier this year, some processors switched over to whey powder, which tightened supply.
•  Nutritional consumer protein demand continues to grow.
•  European whey buyers have been caught short on their whey, driving spot whey prices much higher than U.S.
•  Chinese infant formula demand remains strong, also importing 18% more infant formula for June YOY numbers.
•  Chinese pork industry is trying to recover its swine herd. One of the best ways to decrease piglet mortality rate is to feed them more whey powder- so that is what China is doing. The rising prices appear to not slow the insatiable demand for whey powder.

U.S. Cold Storage Report Up Again
•  Inventories of natural cheese are up again from the previous month and up 10% from the June 30th YOY cold storage report. Cheese inventories are once again at all-time high.
•  Butter inventories are up slightly from last month, but up 27% YOY in June 30th (largest stock since 1993).

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