Dairy Market Headlines
- GDT Down 3.9%
- EU, New Zealand, Australia & Argentina Milk Down
- EU Closed First SMP Intervention Tender – No Buyer Found on Second Tender
- U.S. Milk Production Up 2.4% YOY
- U.S. Feed Costs Continue to Decrease
- U.S. Whey & WPC Exports Up, Especially to China
- Whey & WPC Stocks Down
GDT Down 3.9%
- First Global Dairy Trade of 2017 dropped 3.9%.
- Whole milk powder was the largest factor for the decrease; down 7.7% and accounted for half of the volume traded. Loses were spread across all contract periods.
- Skim milk powder accounted for about a quarter of the volume traded and was up 2.3%.
- Butter continues to rise; up 66% since early May’s GDY auction.
- CME spot cheddar block and barrels remain flat.
EU, New Zealand, Australia & Argentina Milk Down
- EU November milk receipts are expected to be down around 4% TOT; worse than expected.
- EU milk analysists predict that EU milk numbers will be down YOY each month till mid-2017, with overall milk supply down YOY for the entirety of 2017.
- Oceania milk production sharply lower YOY forcing Asian buyers to look toward the U.S./EU for cheaper costs.
- Argentina milk production is down 18.3% YOY in November; equivalent of 193 million gallons YOY decrease.
- Year-to-date milk production down 12.1%. Poor weather and milk prices below cost of production have been major contributors.
- Combining EU, Argentina, and NZ decrease in milk production has inflated global milk prices, with the U.S. rapidly working to fill the gap.
- This increase in dairy commodity prices has Argentina producers projecting milk growth in 2017 if coupled with more favorable weather.
- Neighboring Brazil’s milk production is also down 10.9% in November verses October due to heavy rains.
EU Closed First SMP Intervention Tender – No Buyer Found on Second Tender
- The first 40 metric tons of skim milk powder that they bought during intervention sold.
- All 40 metric tons moved at around 2,150 Euros per ton. Half went to the UK the other half went to Germany.
- 70% of bids were reported lower than 1,800 Euros per ton.
- EU SMP futures jumped 100 Euros per ton following this news.
- January 9th EU tender process ended without selling any of its 350k tons of stock still available. The highest bid was 1,961 Euros per ton, lower than EU SMP quoted market price; ergo the commission rejected all bids.
- Buyers seemed to be testing EU commission if they can get the SMP below market prices. We will have to wait for upcoming tenders.
- EU has reported offering intervention bids twice a month.
U.S. Milk Production Up 2.4% YOY
- U.S. national milk production rose 2.4% YOY in November, yield being the largest contributor.
- The southwest states had a large increase, up 2.6% YOY.
- California out-put was up 0.2% YOY.
- Idaho up 2.6% YOY.
- Texas up 11.4% YOY.
U.S. Feed Costs Continue to Decrease
- The margin protection program (MPP) calculates that in November 2016 the average cost to produce 100lbs of milk was only $7.62.
- Corn, Soybean, and Alfalfa prices have continued to decrease, while milk prices have increased. All milk prices were $17.60/cwt.
- Farmers enrolled in the MPP production program are unlikely to see payments for the end of 2016.
- With such a favorable margin, U.S. milk producers are forecasted to continue their growth.
U.S. Whey & WPC Exports Up, Especially to China
- Whey exports were 41,938 tons, up 22% YOY. Sales volume to China, our largest market, was the lowest in five months, but still topped year-ago levels; 267% increase YOY in November.
- Shipments of whey protein concentrate (WPC) remained on a record pace. In the first nine months of the year, exports were up 19% from 2015 levels. In September, total whey exports to Southeast Asia were up 86%, led by the largest volume of WPC to Southeast Asia in four years.
- China was the largest importer of U.S. Whey Protein Concentrate (>80% protein) in October and November.
- U.S. exports of WPC80 jumped 292% YOY. The volume was small (165 MT total) but if they continue to be short of milk, this number should rise. A strong bullish whey market indication since Australia is historically a net exporter.
- With Chinese milk production decreasing and low opening 2017 stocks, many analysist are expecting a massive increase in all Chinese dairy imports YOY in 2017.
Whey & WPC Stocks Down
- Whey production was down 9.5% in November vs. October, and down 7.5% YOY. This coupled with strong demand has cut down whey stocks recently.
- WPC production remains down YOY in November.
- WPI was the only whey product that had YOY gains in November.