milk and milk products july 2016 - food and agriculture ...€¦ · milk and milk products: price...

Milk and milk products: price and trade update July 2016

Weekly Newsletter

Milk and Milk Products

Price and Trade Update: July1

INTERNATIONAL PRICES: Prices begin to rise from their trough

Since reaching a peak at the beginning of 2014, international dairy prices have fallen steeply.

Compared to a year earlier, the FAO Dairy Price Index in July was 4.6 percent lower, mainly on

reduced prices for cheese. Over the period, export supplies of dairy products remained ample,

which, in conjunction with sluggish import demand, kept prices at low levels. On a monthly

basis, however, the FAO Dairy Price Index was up by 4.3 points (3.2 percent) in July 2016,

when it averaged 142.3. Uncertainty over the expected level of the new season’s milk output in

Oceania and rising demand from Asia were two factors in the jump in prices.

1 The Milk and Milk Products: Price and Trade Update is prepared by the meat and dairy section of the Trade and Markets Division,

FAO. The present issue covers developments up to the end of July 2016.

Milk and Milk Products Price and Trade Update

July 2016


Trade Outlook: Overview

Recovery in trade expected

Low prevailing international prices for dairy products are expected to contribute to a revival of

world demand, boosting trade by 1.5 percent to 73.2 million tonnes of milk equivalent in 2016.

This follows the market upheavals of 2015, when a sharp fall-off in shipments to China and the

continuation of the Russian Federation embargo on imports from specific countries caused

growth to stall. The main drivers behind the rise in trade are a continued expansion of imports in

Asia, including by Viet Nam, Bangladesh, Sri Lanka and the Republic of Korea, with a

limited recovery in China, and, in the other regions, an increase in purchases by the Russian

Federation, the United States and Algeria. By contrast, imports are anticipated to fall in

Nigeria, Venezuela, Saudi Arabia, Yemen and Brazil.

The EU, likely to take the lead among exporters in supplying increased import demand, may see

its sales rise by 4.1 percent to 19.2 million tonnes of milk equivalent. This would place it at

almost the same level as New Zealand – each with 26 percent of world trade – and peg them as

the joint major exporters of dairy products. The rise in EU exports would stem from a rise in

milk production, limited growth in consumption within its internal market and a favourable

Euro/USD exchange rate. External sales by Belarus are also projected to record strong growth

due to a rise in trade with the Russian Federation. In Oceania, low world prices are forecast to

depress output and thereby limit expansion in exports. Meanwhile, higher domestic prices in the

United States relative to those prevailing in the world market are projected to curb the country’s

exports.

50

100

150

200

250

300

350

400

2008 2009 2010 2011 2012 2013 2014 2015 2016

2002-2004=100

FAO Dairy Export Price Indices: 2008 - 2016

WMP

SMP

Cheese

Dairy Index

Butter


0

2000

4000

6000

8000

10000

12000

14000

* Milk Equivalent, '000 tonnes

Milk and Milk Products Imports *

2014

2015

2016 f'cast

0

5000

10000

15000

20000

25000

New Zealand EU United States Belarus Australia Argentina

* Milk Equivalent, '000 tonnes

Milk and Milk Products Exports *

2014

2015

2016 f'cast


Whole milk powder (WMP)

Trade projected unchanged

World trade in WMP is projected to be unchanged in 2016, at some 2.6 million tonnes. The

primary factor affecting the market this year is the anticipated partial recovery in imports by

China, which for the first three months of 2016 already recorded a 20 percent increase compared

to the same period in 2015. Should international prices remain low, this could stimulate

purchases especially by Algeria, Viet Nam, Oman, the United Arab Emirates, Bangladesh,

Cuba and Sri Lanka.

The revival of world import demand for WMP in 2016 is foreseen to have a positive impact on

sales by the EU and Uruguay, while reduced milk production in New Zealand and Argentina,

may mean that their exports could diminish. Much will depend on the price movement of WMP

relative to other products and on the volume of milk produced in both countries in the first part

of the 2016/2017 dairy year.

IMPORTS: TOTAL MILK

thousand tonnes (Milk Equivalent)

2014 2015 2016

Change

2016

over

2015 (%) prelim. f'cast

World 68610 68407 69446 1.5

China 13216 10760 11465 6.6

Mexico 2887 3327 3323 -0.1

Russian

Federation 3834 3010 3131 4.0

Algeria 3115 3057 3127 2.3

Saudi Arabia 3136 3091 3012 -2.6

UAE 2400 2745 2684 -2.2

Indonesia 2531 2522 2536 0.5

Malaysia 2085 2296 2276 -0.9

EXPORTS: TOTAL MILK

thousand tonnes (Milk Equivalent)

2014 2015 2016

Change

2016

over

2015 (%)

prelim. f'cast

World 72120 72153 73211 1.5

New Zealand 19053 19307 19384 0.4

EU 17380 18401 19160 4.1

United States 10499 9349 9307 -0.5

Belarus 4370 4790 4952 3.4

Australia 3514 3644 3717 2.0

Argentina 2144 2017 2002 -0.8


0

50

100

150

200

250

300

350

400

Jan-Mar 2012 Jan-Mar 2013 Jan-Mar 2014 Jan-Mar 2015 Jan-Mar 2016

* product weight, '000 tonnes

China: WMP Imports *

0

50

100

150

200

250

300

350

China United

Arab

Emirates

Algeria Nigeria Sri Lanka Indonesia

* Selected countries, product weight, '000 tonnes

WMP exports: New Zealand *

Jan-Apr 2014

Jan-Apr 2015

Jan-Apr 2016


IMPORTS: WMP

‘000 tonnes (product weight)

2014 2015 2016

Change

2016

over


World 2528 2423 2489 2.7

China 785 456 518 13.4

Algeria 204 223 234 4.8

UAE 176 200 205 2.3

Venezuela 132 191 181 -5.3

Saudi Arabia 107 104 105 0.8

Nigeria 108 105 99 -5.7

Skimmed milk powder (SMP)

Trade to grow Trade in SMP is predicted to expand by 2.8 percent (or 61 000 tonnes) in 2016 to

2.3 million tonnes, sustained by increased production in exporting countries and low

international prices. China, Viet Nam, Egypt, the Philippines, Malaysia, Thailand, Indonesia

and Singapore, among others, are anticipated to boost purchases and more than counterbalance

reduced deliveries to Saudi Arabia, Yemen, the Russian Federation and Nigeria. About half

of the 61 000 tonne predicted increase in 2016 world trade is expected to be met by the EU and a

third by New Zealand. In the case of New Zealand, stymied import demand for WMP has led to

greater emphasis on SMP production and export, with Southeast Asia being the principal

destination. Exports by Australia, the United States and the Ukraine are also anticipated to

grow.

The opening of EU intervention purchases of SMP at the start of the year, combined with storage

financed under the Private Storage Aid scheme, meant that in excess of 300 000 tonnes of

product, or 20 percent of EU’s production and over 40 percent of the level of exports achieved in

2015, were removed from the market during the first part of the year. The reduced pressure to

dispose of excess supplies caused cumulative EU SMP exports for the first four months of 2016

to fall by 8 percent when compared to the previous year. Within this period, the main decline in

exports occurred in April, when sales to intervention increased sharply. Large sales to

intervention were facilitated by the doubling of the intervention intake limit in April from 109

000 tonnes to 218 000 tonnes, a level that was reached at the end of May. This meant that any

further EU-financed purchases to support the market will have to take place under a tendering

EXPORTS: WMP


2014 2015 2016

Change

2016

over


World 2596 2565 2565 0.0

New Zealand 1424 1380 1370 -0.8

EU 389 390 403 3.4

Argentina 144 138 127 -8.2

Uruguay 58 97 100 2.6


process. For the year up to July, three tenders were held (19 April, 7 June, 21 June) which added

an additional 169 000 tonnes of SMP to intervention.

0

50

100

150

200

250

300

350

2012 2013 2014 2015 2016


SMP Imports*

Mexico

China

Malaysia

Indonesia

Algeria

Russian Fed.

Philippines

Viet Nam

0

100

200

300

400

500

600

700

800

2012 2013 2014 2015 2016


SMP Exports*

EU

United States

New Zealand

Australia

Belarus


IMPORTS: SMP


2014 2015 2016 Change

2016

over


World 2124 2139 2172 1.6

Mexico 203 259 260 0.6

China 286 234 251 7.2

Malaysia 138 147 150 2.0

Indonesia 146 143 145 1.7

Algeria 168 146 145 -0.7

Russian Fed. 95 110 107 -2.5

EXPORTS: SMP


2014 2015 2016

Change

2016

over

2015 (%)

prelim. f'cast

World 2139 2215 2276 2.8

EU 646 684 715 4.5

United States 554 560 564 0.7

New Zealand 383 411 430 4.5

Australia 164 201 210 4.7

Belarus 90 111 112 1.2

Butter

Trade rebounds

Trade in butter is forecast to rebound, after falling in 2015. Sales are expected to rise by

4.6 percent to 989 000 tonnes. Along with other dairy products, international quotations for

butter have fallen, dropping 45 percent from USD 4 853 at their peak in January 2014 to

USD 2 657 per tonne in May 2016. Low prices are projected to stimulate import demand,

namely by China, the United States, Saudi Arabia, Egypt, the Islamic Republic of Iran, the

United Arab Emirates and Malaysia. Imports by the Russian Federation are also forecast to

grow, while purchases by the EU are unlikely to change much.

Among exporting countries, the EU and Belarus are projected to benefit most from the rise in

world imports. In the EU, both growth in output and a favourable rate of exchange are

anticipated to underpin a rise in sales. Meanwhile, in Belarus, augmented trade with the Russian

Federation could boost shipments for the third year. In the case of New Zealand, exports are

expected to stay around the 505 000 tonne mark. For the United States, increased production of

cheese and yogurt, and strong domestic demand from the food industry may contribute to

keeping internal butter prices high, thus constraining export sales for the third year in a row.


0

20

40

60

80

100

120

140

160

180

2012 2013 2014 2015 2016 f'cast


Butter Imports *

China

Russian Fed.

Saudi Arabia

Egypt

Iran Islamic Rep Of

United States

UAE

0

2

4

6

8

10

12

14

16

18

China Saudi Arabia Egypt United States Russia


Butter Exports: EU major destinations *

Jan-Apr 2013

Jan-Apr 2014

Jan-Apr 2015

Jan-Apr 2016


IMPORTS: BUTTER


2014 2015 2016 Change

2016

over


World 938 871 904 3.8

China 113 106 115 8.2

Russian Fed. 150 96 108 12.8

Saudi Arabia 66 55 60 9.1

Egypt 47 56 60 7.8

Iran Islamic Rep Of 38 47 50 6.7


EXPORTS: BUTTER


2014 2015 2016 Change

2016

over


World 980 946 989 4.6

New Zealand 510 500 505 0.9

EU 148 185 210 13.2

Belarus 69 83 95 14.5

Australia 43 34 33 -4.9


Cheese

Modest growth in trade

Trade in cheese is forecast to register limited growth in 2016, increasing by 1.6 percent to

2.4 million tonnes. International quotations for cheese fell by 50 percent from the peak of

USD 5 225 per tonne in February 2014, reaching USD 2 588 per tonne in May 2016. The

principal countries anticipated to import more are the Russian Federation, United States,

Republic of Korea, Japan, Iraq and Mexico. Among the major exporters, increased shipments

are forecast for the EU, Belarus, Argentina and the Islamic Republic of Iran, while sales by

New Zealand, the United States and Egypt are predicted to fall. Exports by the EU could rise

by 6.1 percent to more than 763 000 tonnes, which would represent the first annual increase

since the Russian Federation embargo was imposed in 2014. Because of the prior importance of

the Russian Federation, which absorbed a third of EU exports before the ban was introduced, the

EU has had to shift its export focus elsewhere – mainly to the United States, Japan, the Republic

of Korea and Saudi Arabia. Meanwhile, as the pre-2014 traditional suppliers continue to be

subject to the embargo, Belarus now has considerable opportunities for export to the Russian

Federation and consequently its exports are projected to rise by 8.1 percent in 2016, to over

192 000 tonnes. The sharp fall in WMP imports by China in 2015 caused New Zealand to focus

more on cheese as an alternative use for milk. Consequently, its cheese exports rose by

18 percent in 2015 to 327 000 tonnes. For 2016, reduced milk production could see shipments

drop to around 300 000 tonnes. In the United States, continued strong domestic demand for dairy

products in general and depressed international prices for cheese are anticipated to lead to a

second year of diminished cheese exports.


0

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300

350

400

450

500

2012 2013 2014 2015 2016

f'cast


Cheese Imports *

Japan

Russian Fed.

United States

Saudi Arabia

China

Mexico

Korea Republic Of

020406080

100120140160180200


Cheese Exports: EU major destinations *

Aug '13-Apr '14

Aug '14-Apr '15

Aug '15-Apr '16


For comments or queries please use the following email contact: [email protected]

Use of material is subject to credit being given to source:

Milk and Milk Products: price and trade update

Trade and Markets Division

Food and Agriculture Organization of the United Nations

IMPORTS: CHEESE


2014 2015 2016

Change

2016 over

2015 (%)

prelim. f'cast

World 2237 2206 2263 2.6

Japan 232 249 254 1.9

Russian Fed. 316 208 225 8.3


Saudi Arabia 148 144 140 -2.8

China 108 121 123 1.2

Mexico 99 118 121 2.5

Korea Republic Of 97 112 120 7.6

EXPORTS: CHEESE


2014 2015 2016 Change

2016

over


World 2402 2392 2430 1.6

EU 721 719 763 6.1

United States 371 318 306 -3.7

New Zealand 278 327 305 -6.7

Belarus 166 178 192 8.1

Australia 151 171 173 1.3

Saudi Arabia 115 120 120 0.0

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