global dairy trade - smp presentations/field.pdfiris consulting • consultancy specializing in...
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Global Dairy Trade - SMP
iRIS Consulting
• Consultancy specializing in international dairy industry, based in EU & USA
• Business opportunity assessments & feasibility studies
• Strategic marketing consultancy, planning & evaluation
• Export market/trade contact development programs
• Economic & policy analysis
• Company search and appraisal
• Competitor profiling
The World Dairy Market
+3.5% CAGR
2007 averages US$/lb: Nass 1.693 DMN 1.762 EU 1.994 NZ 1.953
SMP Price Trends 2005-07
WORLD Income of manufacturing of Cheese/Wheypowder,
SMP/Butter and WMP/Butter (in USD)
250
300
350
400
450
500
550
600
650
Mar 07 Apr 07 May 07 Jun 07 Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08 Feb 08 Mar 08
US
D fo
r 100 k
g o
f M
ilk
Cheese/Butter/Whey
SMP/Butter
WMP/Butter
Revenue by Plant Type
Key SMP Importers, 2007
0
2 0
4 0
6 0
8 0
1 0 0
1 2 0A
lge ri
a
Mex ic
o
Ind o n es ia
P h il ip p in
es
T h a ilan d
Ru ss ia
'00
0 M
T
NZ Milk Powder Export Trends
0
5 0
1 0 0
1 5 0
2 0 0
2 5 0
Q3 0
4Q
4 04
Q1 0
5Q
2 05
Q3 0
5Q
4 05
Q1 0
6Q
2 06
Q3 0
6Q
4 06
Q1 0
7Q
2 07
Q3 0
7Q
4 07
‘00
0 M
T
W M P S M P
Key SMP Exporters, 2007
0
5 0
1 0 0
1 5 0
2 0 0
2 5 0
3 0 0
New
Ze a la
n d
US
E U-2
7A
us tra lia
Uk ra
ine
Be la
rus
Me rc
o s u r'0
00
MT
SMP Export Growth, 2003-07
-6 0
-4 0
-2 0
0
2 0
4 0
6 0
8 0
1 0 0
1 2 0
1 4 0
Ne w
Ze a la
n d
US
E U-2
7
Au s tr
a lia
Uk ra
ine
Me rc
o s u r
% c
ha
ng
e
2008 SMP Prices• Q1 trading in range $3,000-3,600
• After the recent decline, world price up in March: $3,000>$3,400/MT
• March ‘08 price lower than March ’07 (contrast to FCMP & butter)
• EU price down - production in Q1 ‘08 remains strong with milk supply growth (farmers encouraged to ignore quota overshoot by the high prices), high cheese stocks
Position of Key Suppliers
• Oceania supply constrained until late 2008:
– NZ late season drought curbing milk production; 2007/2008 (June 1–May 31) volume to fall by 4.5%?
– Australia: YTD milk production down 6% (despite February <1% down: first positive monthly growth in Northern Victoria since August 2006)
• EU: aided by market rise, but impacted by stronger Euro
• US competitiveness enhanced by weakening dollar vs key currencies eg €, RMB
Australia’s Rainfall Problem
Are the zones being
pushed south, by warming?
Aspects of NZ Product Mix
• Increased MPC production could detract from skim milk availability
• Extra permeate could be an attraction of more MPC (for milk powder standardization, reflecting protein variability of highly seasonal production)
• If demand for WMP slows, extra milk may go to cheese to balance milkfat production with available markets - reducing SMP availability to the international market
New Suppliers - Limited Options
• Belarus
– Largely restricted to Russia ~ 45,000 MT
– Exports to Russia now up, large price drop
– Dumping accusations, govt action?
• Ukraine
– Offset lower Russian sales with exports to new markets inc China in 2007
– But milk production sliding, quality issues
New Suppliers - Limited Options
• Argentina
– Clear net exporter but 2007 volumes down
– SMP relatively low priority
– Export taxes aimed at
o Ensuring domestic market supply
o Controlling inflation
o Redistributing wealth
o Raising money
New Suppliers - Limited Options
• India
– Govt. ban meant exports grew little last year
– 04 dairy exports Jan-Nov ‘07 = $130 mn (+9%)
– Despite considerable industry investment
– Export availability hampered by
o Growing domestic demand
o Higher domestic prices
Future for SMP Prices?
• Market fundamentals remain
– Demand strong
– Supply constrained
• Prices more likely to rise than fall
• World prices will increasingly reflect the US domestic price for SMP
• Will this be enough to increase US SMP production?
