dairy market report 2nd march 2010

8/8/2019 Dairy Market Report 2nd March 2010

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Dairy Market Report

End February/Early March 2010



Latest Developments - EU (1)• EU market prices stabilising above intervention (25% above for

butter, 10 to 12% above for SMP) – expected to do so for a fewweeks at least (slight lift in feed SMP in last 2 wks)

• Market tightening

• Intervention: new season opened as of 1st March, but nointervention purchases expected for the short term

• Cold weather + poor prices limiting supplies – France 1 to 2%below a year ago

• SMP export competitive against US product, and strong exportssince October

• Butter uncompetitive still, but gap has narrowed

• US$ strength against weak Euro has helped EU exports

• Cheese output more profitable so could increase again, limitingSMP/butter supplies



Latest Developments (2)

Concerns:• Stock releases in EU and US causing nervosity

– Concerns over Deprived Persons Scheme andintervention stock handling

• UDF milk auction in NI down 0.73ppl to 23.32ppl (equals to 26.62cpl at current exchange rate)

• Unknowns:– Outcome of Fonterra auction on 2nd March – will

include SMP for first time, in addition to WMP andAMF.



Branded butter (bulk) EU prices

Early Jan 09 to Late Feb 10

1800

2000

2200

2400

2600

2800

3000

3200

3400

3600

3800

E a r l y

J a n

E a r l y

F e b

E a r l y

M a r

E a r l y

A p r

E a r l y

M a y

E a r l y

J u n

E a r l y

J u l

E a r l y

A u g

E a r l y

S e p t

E a r l y

O c t

E a r l y

N o v

E a r l y

D e c

E a r l y

J a n

E a r l y

F e b

€ / t o n n e

Belgium

Germany

France

Netherlands

Poland



SMP feed (spray) EU prices


1300

1400

1500

1600

1700

1800

1900

2000

2100

2200

2300

E a r l y

J a n

E a r l y

F e b

E a r l y

M a r

E a r l y

A p r

E a r l y

M a y

E a r l y

J u n

E a r l y

J u l

E a r l y

A u g

E a r l y

S e p t

E a r l y

O c t

E a r l y

N o v

E a r l y

D e c

E a r l y

J a n

E a r l y

F e b

€ / t o n n e

Germany

France

Netherlands

Poland



WMP EU prices


16001800

2000

2200

2400

26002800

3000

3200

3400

3600

E a r l y

J a n

E a r l y

F e b

E a r l y

M a r

E a r l y

A p r

E a r l y

M a y

E a r l y

J u n

E a r l y

J u l

E a r l y

A u g

E a r l y

S e p t

E a r l y

O c t

E a r l y

N o v

E a r l y

D e c

E a r l y

J a n

E a r l y

F e b

€ / t

Germany

France

Netherlands

Poland



Whey powder (feed spray) EU prices


310360

410

460

510

560

610

660

710

E a r l y

J a n

E a r l y

F e b

E a r l y

M a r

E a r l y

A p r

E a r l y

M a y

E a r l y

J u n

E a r l y

J u l

E a r l y

A u g

E a r l y

S e p t

E a r l y

O c t

E a r l y

N o v

E a r l y

D e c

E a r l y

J a n

E a r l y

F e b

€ / t o n n

e

Germany

France

Netherlands



World market



World market developments

• Awaiting March 2nd Fonterra tender: first time to include

SMP• Constricting supplies

– NZ milk production 6.2% down on previous year for July-Dec period,though full 12 month expected 4% down

– Oz supplies down 6% in second half of 2009– Product availability from Oceania will be very limited in coming months

– US supplies expected to fall further

– Cold weather restricting supplies all over EU – will delay Spring peak

• Rising demand– International tender for 30,000 to 50,000t of SMP + WMP mix currently

being watched (Algeria??): expected to benefit EU traders most of all –due to short dates for delivery (March-May)

• EU best placed to pick up on export demand over coming

months.



World prices for New Zealand products

2007 to 2010 todate

1400

1900

2400

2900

3400

3900

4400

4900

5400

2007 2008 2009 2010

Week No.

U S $ / t

Butter SMP WMP Cheddar



World dairy market prices - Western European products2007 to 2010 todate

400

1400

2400

3400

4400

5400

13579 1 1 1 3 1 5 1 7 1 9 2 1 2 3 2 5 2 7 2 9 3 1 3 3 3 5 3 7 3 9 4 1 4 3 4 5 4 7 4 9 5 113579

1 1 1 3 1 5 1 7 1 9 2 1 2 3 2 5 2 7 2 9 3 1 3 3 3 5 3 7 3 9 4 1 4 3 4 5 4 7 4 9 5 113579

1 1 1 3 1 5 1 7 1 9 2 1 2 3 2 5 2 7 2 9 3 1 3 3 3 5 3 7 3 9 4 1 4 3 4 5 4 7 4 9 5 11357

2007 2008 2009 2010

Week No.

U S $ / t

Butter SMP WMP B'oil Whey Powder



EU SMP competitive on worldmarket without refunds – butter not

1st March 2010

NZ v. US v.

EU Refund € $ $/€ x rate Ocean. Europ. US EU EU

SMP 1900 0 1900 2600 1.36857 2750 2675 2794 -150 -194

Butter 2850 0 2850 3900 1.36857 3650 3825 3097 250 803

Exch rate w hole month of Feb 2010

1 tonne = 2205 lbs

World pr ice in US$EU Price in €



U S C

a s e i nr e t ur n s b

a c k t o2

0 0 7 l e

U S c a

s ei nr e t ur n s ( i n

€ / t )

J an 0 4 t o

M ar 1 0

3 0 0 0

4 0 0 0

5 0 0 0

6 0 0 0

7 0 0 0

8 0 0 0

9 0 0 0

1 0 0 0 0

Jan-04

Mar-04

May-04

Jul-04

Sep-04

Nov-04

Jan-05

Mar-05

May-05

Jul-05

Sep-05

Nov-05

Jan-06

Mar-06

May-06

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

€/tonne

C a s ei n ai d

A v c a s ei n pr i c e



Exchange rate make EU productmore competitive

US$ down 8% against

Euro since Nov 09

Current: €1 = $1.368

Stg £ down 4.3% againstEuro since Oct 09

Current: €1 = Stg£ 0.876



Outlook for Spring?

• Product prices may not dip with seasonal spring

production increase if EU export rise• This is likely in view of low Australasia and US

availability

• Advantage of weak Euro/strong US$/Stg• EU cheese prices now compare favourably and

competitively with US and Oz+NZ

• Demand could strengthen• Commitment on stock holding from new

Commissioner?



Spring 2010 Milk Prices



Co-op Collection Jan change Jan price

Drinagh 0.40 1 25.25

Bandon 0.00 1 25.21

Barryroe 0.28 1 24.93

Lissavaird 0.28 1 24.87

Lakeland 0.39 No change 24.48

Arrabawn 0.50 No change 24.08T. of Mon. 0.40 No change 24.00

Newmarket 0.00 No change 24.00

Wexford 0.00 No change 24.00

North Cork 0.00 No change 24.00

Dairygold 0.00 No change 23.77Tipperary (See below) No change 23.76

Glanbia 0.00 No change 23.76

Kerry 0.00 No change 22.81

Con Gold (incl in –C) No change 22.39

Conditional bonuses not included above:

Lakeland: Oct-Mar lactose bonus 0.27+ VAT paid > 88% of suppliers incl.

Glanbia: 1.5c/l lactose-related bonus if June production <16%

Con Gold: 0.44c/l 7-milk cap; 0.3c/l <200k SCC; 0.3c/l <30k TBC

West Cork Co-ops: 0.88c/l <200k SCC for Nov to Feb milk

Dairygold: 0.4c/l <200k SCC

Tipperary: Coll free for capacity for 3 days’ milk; 0.1c/l <200k SCC

Manufacturing Milk Prices—January 2010c/litre , 3.3% p, 3.6%f, ex. VAT, collec, and cond. bonuses



Milk supplies dipping due to lack of profitability more than bad weather

Milk supplies falling month on month since last April

Down 3% year on year11% below quota at end Jan 10

0

100

200

300

400

500

600

700

800

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

m l i t r

e s 2008

2009

2010



2c/l price lift needed and justifiedon basis of whole year outlook

• Average Jan milk price: 24c/l• Teagasc estimate for 2010 costs: 23c/l

• To cover costs + pay modest wage: need 28c/l

• 26c/l by March not unreasonable

• 2c/l price increase by March needed to

– Boost confidence

– Reassure bank manager

– Secure milk supplies



Thank you for your attention!

dairy market report 2nd march 2010

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