The European Milk Market Observatory meet in Brussels yesterday (Tuesday) and officials from the European Commission are not likely to paint a pretty picture of the dairy market.
According to latest data from the Commission quotes for Whole Milk Powder (WMP) have fallen by 5.7% in the last two weeks alone to $2,480/t. Quotes at this level are now some 42% behind those of 12 months ago when WMP was trading as high as $3,860/t.
Quotes for the product are no at levels not seen since dairy prices hit rock bottom in April 2009. Despite the falls in Europe prices down under have taken a even greater hit with quotes in Oceania down 11.7%, according to the Commission data.
Quotes for EU Skimmed Milk Powder (SMP) have faired little better in the last two weeks down 3.6% to $1,903/t. When compared to quotes of $4,290/t offered 12 months ago they have fallen by more than half. Similar to WMP, quotes have taken a much larger hit in Oceania down 11% in the last two weeks.
Falls in quotes for butter have been smaller but still significant. In the last two weeks European butter quotes have fallen by 2.8% to $3,234/t. Meanwhile falls in New Zealand and Australia have also been high at 3%. Compared to the same month last year quotes for butter in Europe are 33% lower.
The continuation of the Russian import ban is translating mainly into lower exports of cheese despite a strong re-direction of trade to other destinations, according to the European Commission.
In its latest outlook for the dairy sector, it says the additional milk is being channelled into skim milk powder (SMP) and butter.
According to the Commission, in 2015 SMP production is expected to increase by close to 8%. Between January and April, milk collection was still below last year, additional milk was channelled to SMP production (+1.3%) driven by export markets.
The Commission says this orientation is expected to be strengthened with increasing milk collection in the remaining months of 2015, while growth in cheese production is expected to remain limited.
For the whole 2015 year, it says SMP exports are expected to reach close to 760 000 tonnes, 17% above last year because favourable export conditions observed in the first four months of the year are expected to continue the whole year.
With the increase in supply, the Commission says SMP stocks might accumulate in the next months, but they are expected at the same level as last year by December 2015.
At the end of April 2015, SMP stocks under the private storage aid scheme, were limited to 14,000t.
The Commission also says the fat market is doing well and butter exports are expected to increase by close to 10% in 2015 despite the Russian import ban.
A 9% increase was already observed in the first four months of the year, with higher shipments mainly to Egypt, Saudi Arabia and the US, it says.
According to the Commission outlook, the EU and New Zealand are benefiting most from the US shortage in butter.
On the back of this, it says butter production is expected to increase by close to 3% in 2015 compared to 2014.
Exports, although dynamic, are not the main driving factor of this expansion: they represent less than 7% of production, the Commission says.