| USDA released their international prices earlier today |
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| Written by Administrator |
| Thursday, 10 June 2010 13:41 |
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USDA released their international prices earlier today. These numbers do not appear surprising and were within our expectations. Oceania (vs. May 27 report) Butter: $1.8370 (DOWN $0.0227) Skim Milk Powder: $1.4515 (DOWN $0.0907) Whole Milk Powder: $1.7463 (DOWN $0.0227) Cheddar Cheese: $1.7917 (DOWN $0.0227) Western Europe Butter: $2.0015 (DOWN $0.1077) Skim Milk Powder: $1.3211 (DOWN $0.0794) Whole Milk Powder: $1.5876 (DOWN $0.0567) Whey Powder: $0.3606 (DOWN $0.0420) OCEANIA COMMENTARY CHEDDAR CHEESE: Cheddar cheese markets in the Oceania regions are generally steady with prices unchanged to slightly lower. Traders indicate that contract negotiations for the upcoming milk production season have been going quite well. Some negotiations are complete and indications are that buyers are seeking volumes of previous years. At this point, Oceania suppliers are indicating that cheese stocks will be in close balance during the upcoming winter months, but feel that they will be able to fulfill their contractual commitments without reaching into the new milk production season. WHOLE MILK POWDER (WMP): Oceania whole milk powder markets are weak with prices unchanged to lower. At the June 1 global/Dairy Trading event, whole milk powder averaged $3,790 per MT, down 3.6% from the previous monthly average. For deliveries during the second (Sep - Nov) and third (Dec - Feb) contracting periods, the average price dipped below the $3,790 figure. Traders and handlers anticipated weaker average prices and continue to predict lower prices for the future. Oceania's milk production season is now at or very near the seasonal low level, thus no new powder is being generated. Late season stock levels are often not at projected level, thus some traders indicate that they may need to reach into new production to round out 2009 - 2010 commitments. SKIM MILK POWDER (SMP): Oceania skim milk powder markets and prices are weak. At the June 1 global/Dairy Trading event, the average price for skim milk powder ($3,462) was down 4.2% when compared to the previous auction. Traders and handlers anticipated a weaker trend to this average price and project further weakness. Oceania is now entering into the winter season with milk output at or very near seasonal low levels, thus manufacturing of new powder is non-existent. Most traders and handlers are working closely with customers to meet late season contractual commitments with some suppliers stating that they may need to reach into new production to fulfill 2009 - 2010 commitments. Oceania traders are also closely monitoring what impact the release of European intervention skim milk powder stocks might have on markets. At this point, no skim milk powder has been sold back under the tendering system as all bids during the first round of bidding were rejected. The next tenders are due June 15th. BUTTER: Oceania butter markets remain firm as butterfat continues to be limited. Limited butterfat has plagued Oceania cream users for much of the season and at this down time of the milk production season, these effects continue. Butter prices are mixed with some declines and increases being reported. Traders and handlers state that they are making the best of the situation by working closely with customers and meeting their late season contractual needs. OCEANIA MILK PRODUCTION OVERVIEW: The milk production year concluded in New Zealand at the end of May and early reports are indicating that annual production was even with last year on a volume basis and slightly higher (0.3%) on a milk solids basis. Milk producers and handlers are pleased with these figures, especially following a sharp decline in milk output late in the season due to limited rainfall. In recent weeks, rainfall has been occurring on a regular basis and, for the most part, moisture levels have once again been re-established and conditions are good going into the winter months. In Australia, late season milk volumes continue to run heavier than previous year comparables. April production figures indicate that output was running 2.7% heavier than last April which is bringing year to date figures to -5.2% when compared to the same 10 months (July - April) last season. Australian producers and handlers continue to project that during the final two months of the season, milk volumes will surpass last year and cumulative, year to date, totals will be near -4% versus earlier projections of -6%. In Australia, lack of moisture has plagued much of Northern Victoria for the past few years and water levels have been greatly reduced causing water allocations. In recent weeks, good volumes of rainfall have been occurring throughout the dairy region of Australia and water levels have once again been re-established. At this point, reports are indicating that water allocations for the coming year will once again be at 100%. Farmers are looking forward to the new milk production season with optimism, a situation that has not been in their favor for a number of years. Herd conditioning is also favorable going into the winter season. At the June 1st global/Dairy Trading event, anhydrous milk fat prices were higher for all three contracting period, while generally lower in all three contracting periods for skim and whole milk powder. The average price for anhydrous milk fat was $5,324 per MT, 6.1% higher than the previous months' average. The average skim milk powder price eased 4.2% to $3,462 per MT while the whole milk powder price averaged 3,790, down 3.6%. Traders and handlers are stating that the weak trend in milk powders is the direction these prices should be heading. These prices are getting more in line with other international prices. Milk fat is tight, thus the firm trend for anhydrous is deemed correct, although near term shipment prices seem out of line in comparison to current commercial prices and the prices for the second and third contracting period. Fonterra recently announced that in September, a second online milk powder auction each month will be added. At the August 3 event, buttermilk powder will be added along with two new specifications of existing products, high heat/heat stable skim milk powder and anhydrous milk fat in 1,000 KG bulk packs. Oceania traders and handlers are closely monitoring European intervention removals and what impact these may have on current and future prices. Most feel that the butter removals will have minimal, if any impact on markets, especially with butterfat tight in basically all international markets. Traders and handlers are stating that sales activity is minimal which is typical for this time of the year. Suppliers continue to communicate with contractual buyers about supply availability and with some tweaking of delivery schedules, needs will be filled as contracted. Some suppliers do indicate that they will need to reach into new production to fulfill 2009-2010 commitments. EU COMMENTARY WESTERN OVERVIEW: For the most part, Western European milk producers and handlers feel that milk production has peaked in most regions. The current season got off to a slower than usual start as cold temperatures and winter conditions carried further into early spring. Although the season got off to a slower than usual start, milk volumes quickly increased as warmer temperatures and spring weather patterns developed. The only problem with this situation is that manufacturers and handlers are more accustomed to a gradual build up versus a sharp increase. A slower increase allows manufacturers to accumulate and build inventories on a gradual pace, versus quickly and potentially not to desired levels. The European dairy industry was very interested in the outcome of the recent removal tenders of intervention stocks of butter and skim milk powder. All tenders (1610 - 2100 Euros per MT) for skim milk powder were rejected as the Commission felt that the tenders were too low. Tenders of 3450 - 3850 Euros per metric ton were accepted for 11,515 MT of butter. This was about half of the available butter. The next round of tenders is due on June 15 with 13,669 MT of butter and 79,531 MT of skim milk powder available for bids. Traders and handlers are stating that the release of the butter is having no negative impact on current markets or prices. Basically, the tendered prices were very close or within current commercial price levels and volumes were welcomed into the marketplace as butterfat is still tight throughout Europe. Traders and handlers felt that many skim milk powder bidders were "testing the water" to see how low skim milk powder might be able to be secured even though the need for skim is not as urgent as butter. Europeans and other International traders and handlers were closely monitoring the outcome of the June 1st global/Dairy Trading (gDT) event in the Oceania region. Except for anhydrous milk fat, all prices were generally lower than the previous trading event. Although gDT prices are still higher than European prices, traders and handlers are comfortable with their quotes. Many felt that prices at the gDT were higher than they needed to be in recent months. The overall trend for dairy product prices is lower with much of this weakness occurring due to the decline of the Euro against the U.S. dollar. The Euro has now dipped below the 120 level which is the first time since March 2006 and nearing levels at which the Euro started in 1999. Traders and handlers state that stocks of milk powders are available with butter and butterfat still limited. |