The strong lift in butterfat prices will continue to burn off demand in price-sensitive export markets. Image: Kay A/peopleimages.com/ stock.adobe.com
Global fundamentals for the dairy market have improved since the last update, mostly reflecting supply-side factors. Food & Beverage Industry News reports.
Weaker than expected EU milk solids production and tight cream supplies pushed the butter market sharply higher, supporting the lift in Oceania butterfat and EU cheese prices.
It’s likely to be several months before the EU butterfat fundamentals weaken. There may be some pushback in EU domestic demand, but a further threat may come from higher availability from NZ when butterfat availability increases seasonally in Oceania from September onwards.
This will test the affordability of high butterfat prices in the Asia and MENA markets and Europe could then become a more viable alternative market for NZ exporters, with lower tariffs under the NZ-EU and NZ-UK FTAs.
The strong lift in butterfat prices will continue to burn off demand in price-sensitive export markets, facing affordability challenges due to still rising prices generally, and a stronger US dollar.
Meanwhile, weak demand and prospect of sustained higher NZ supply will continue to limit the upside for SMP in the EU and US, despite low stocks in both these major producers. Ingredient demand in food processing continues to lag in most domestic markets.
While trade in developing market regions outside of China increased as buyers restocked at lower prices in Q1-24, increased ingredient prices will test viability of this trade in coming months.
The US cheese market remains in focus given the importance of marginal trade to the big three export regions. The rally in US cheese prices stalled, and while there is limited growth in milk output, ongoing pressures on consumer spending and expanding cheese capacity may put global market prices under pressure later in 2024 and into H1-25.
This comes a couple of months after Agriculture Minister Murray Watt spoke about the ‘critical importance’ of the dairy industry’s contribution to Australia.
Minister Watt highlighted the government’s commitment to supporting the $17 billion Australian dairy sector.
“Dairy is Australia’s third largest agricultural industry, and we will continue to do everything we can to support Australian dairy producers and processors, even when that means making tough decisions,” Minister Watt said, referencing the Government’s decision to walk away from the EU trade deal.
The symposium, which was a pledge by the Government at the last federal election, tackled issues facing the industry, including productivity and growth, and sustainability and climate.
ADIC Chair Ben Bennett said the industry was heartened by the Minister’s support.
“Statistics show dairy is a product of choice for Australian consumers, and indeed for many international markets,” he said.
“Every one of the industry’s current challenges presents an opportunity and on Friday, our industry made an important step to working together to drive positive change.
“Now, following the symposium, it’s important that government and industry chart a path forward that ensures the resilience, viability, and prosperity of Australian dairy for generations to come.”
ADIC deputy chair John Williams said the Minister’s announcement to commit funds to Dairy Australia to conduct workshops to explore the productivity challenge was fantastic news for an industry that is crucial to the economy and regional communities.
“We truly believe there are strong opportunities for profitable growth in the Australian dairy processing sector, with a stable domestic market and growing global demand for high quality dairy products,” said Williams.
“Our goal is to secure a strong, vibrant Australian dairy industry and to keep dairy manufacturing local and we’re committed to doing everything we can to make this happen.”
