What we're seeing - 13 December 2017
In our last outlook blog for the year, there are clear signs of increased pressure on cheddar prices, which have held up so far this year. Additional EU milk is likely to go into cheese in preference to SMP/butter where the capacity exists. Meanwhile, US block cheese prices remain under pressure, despite stronger exports.
New Zealand weather is still a wildcard, but rain falling this week could settle some dust. Even if Kiwi output falters, it won’t help cheese values.
Another large development is the recall of French infant formula from China due to salmonella contamination. The Chinese authorities don’t take kindly to these flare ups and the knock-on risk for EU origin-product is one to watch.
Finally, the European Union and Japan have finally concluded negotiations on a free trade agreement, that lasted 4 years and 18 rounds, on a free trade deal to create the world’s largest open economic area – accounting for 30% of global output – making it the biggest free trade deal ever struck. The agreement takes effect in March 2019.
Chart of the week
Our commodity milk value (CMV) has been on a relentless downward slide, and has now dipped below our forecast season average of $5.50kgMS. After peaking in late-June at $6.16kgMS, the CMV now stands at $5.03kgMS, the lowest point since mid-April this year. Over that period, most major commodities have fallen – with the notable exception of cheddar, while the exchange rate has been steady.
With cheddar prices likely to come under increasing pressure as the EU heads toward its peak spring production, there doesn’t appear to be a lot of upside for the CMV for the remainder of 2017/18.
This is our take on what’s happening in Australian, New Zealand and global dairy markets based on our weekly Dairyglobe newsletter. Interested in subscribing to the Dairyglobe? Contact our office on email@example.com or +613 8414 0904 or read more here!