Upload
catherine-lascurettes
View
80
Download
2
Tags:
Embed Size (px)
Citation preview
GREEN SHOOTSExecutive Summary
• Output moderating in NZ and EU, though still rising in US
• GDT recent positive results reflect lower NZ production expectations and lower volumes being put forward by Fonterra
• Chinese demand picking up. Strong lift in NZ WMP sales to China in last two months
• EU average dairy prices firming slightly, reflecting stronger exports, boosted by weak Euro and strong US$
• Extension to APS to end Sept 2015 (from Feb 15) increases market support for EU SMP and butter
• China may already be back, Russia still out, but more affordable products mean demand from Africa, Mid East, SE Asia
• Market prices still weak, but have bottomed out and set to recover over the coming months
• Negative side: low oil prices good for energy costs, but bad for demand from oil producing countries
Global milk output (a)
• EU output easing due to superlevy pressures and cold weather. Also poorer profitability, culling of marginal cows, less feeding.• UK – poor prices and margins due to weak markets, distress
milk and strong Sterling. More moderate growth of 3% y-o-y early Jan
• US output still rising despite recent dairy price collapse. Large number of farmers have locked in margin, so no impact on output. USDA forecast continued growth of 3.3% for 2015.
• NZ output growing more moderately due to drought, lower profitability and less concentrate feeding. Fonterra forecasts 14/15 output to be 3.3% less than 13/14.
Global milk output (b)
• Ireland -17.1% in
Dec;
• +4.2% for
Jan-Dec 2014
• End Dec supplies
5.93% over quota
Global milk output (2)
New Zealand: +2.8% for Nov 2014+4.3% for Jun to Nov 2014Forecast for 14/15 = -3.3% v 13/14
US: +3.1% for Dec 2014+2.37% for Jan to Dec 2014Forecast for 2015: +3.3%
Source: DairyCo UK
Global milk output (3)
Argentina: -8.7% in November 14- 4.3% down Jun-Nov
Australia: -1.6% in December 14+2.62% for Jul-Dec 14 period
Source: DairyCo UK
Global milk output
China’s milk production rising Imports of liquid milk (raw and packaged) is rising faster.
Source: CLAL
Gross milk output (5)
Brazil has been growing its production massivelyfor the last number of years, though nowhere near self sufficient
Source: CLAL
Dairy prices
• Some slight firming in Europe, including in spot milk prices
• Returns from EU average prices up nearly 1c/l in last 2 weeks to 25th Jan
• GDT• 3rd/4th consecutive positive results overall
• 6th for butterfat prices
• 4th for powders
• Lower quantities offered, reflecting lower supplies expected
• US price collapse from Sept to end 14 – some very slight uplift for butter and cheese in early 15
Dairy prices: EU
EUSMP/butter gross return = 31.90c/l before processing
costs
IRELANDSMP/butter gross return = 29.93c/l before processing
costs
Source: EU MMO
Dairy prices: EU
Based on EU MMO
Since Jan 1st:Butter +€130/tSMP +€210/tWMP +€150/tCheddar +€120/tWhey pdr +€ 80/t
Dairy prices and returns - EU
EU gross returns 34.05c/l before processing costs
2.23c/l up in last 4 weeksBased on EU MMO
8th February 2015
Calculations 13/02/15
Avg EU mkt price
at 08/02/15 - €/t
Trend
re
prev
wk c/l equiv
Estimated
coeff.
BUTTER 3040
SMP 2050 31.90 35% 11.17
CHEESE 3250
WHEY PWDR 950 39.17 41% 16.06
WMP 2510 31.13 8% 2.49
OTHER* 27.12 16% 4.34
34.05
ASSUMING THAT "OTHER" RETURNS 15% LESS THAN SMP/BUTTER
ESTIMATE OF RETURNS FOR REPRESENTATIVE IRISH PRODUCT MIX
Dairy prices – GDT 03/02 (2)
Gross returns €c/l
GDT 3rd Feb EU avg 25th Jan
SMP/BUTTER 35.09c/l 30.29 c/l
WMP 31.18c/l 29.15c/l
Based on: GDT
A bit more info on GDT – who sells through it and what do they sell? (1)
IndiaSells SMP and WMP
Co-op owned by Danish, Swedish and German farmersSells BMP and SMP
Mostly Danish, largest wheyand lactose supplier in the worldSells lactose
USSells unsalted butter, lacticand sweet creamalso SMP
Source: GDT
A bit more info on GDT – who sells through it and what do they sell? (2)
USSells SMP
NZSells AMF, SMP,Cheddar, Ren Cas,WMP, butter saltedand unsalted, BMP
AustraliaSells lactose
FranceSubsidiary ofSodiaalSells SMP
GermanySells SWP (sweet wheypowder)
Source: GDT
Market developments (1)
• Latest Chinese stats suggest they are back buying• WMP – strong increases in imports especially from NZ in last two
months• SMP – trend less strong, excess stock still on hand• IMF – stable ongoing import demand, Irl and NL featuring much
more in recent months
• Main markets for SMP • South East Asia – this is where most of the NZ product goes• Price sensitive
• Exchange rates a major factor in making EU exports competitive, and helping EU prices lift• Weak Euro further weakened v. US$ and GB£ by announcement
of QE and outcome of Greek election• Strengthening US $ reflecting stronger economy
• Lower oil prices affecting buying power of oil producing countries
Exchange rates
Euro has weakened 9% against Stg in the last year3.6% in the last month alone (some pick up in recent days)
Euro has weakened 16.2% against US$ in the last year5.6% in the last month alone (some pick up in recent days)
Milk prices
• Milk prices have fallen globally
• Challenges to profitability will/are helping to tame output, more in EU/NZ than in US
• EU milk prices down 15.5% between Jan 14 and Nov 14 – from €40.35/100kgs to €34.10/100kgs (LTO)
• NZ milk prices down 42% season on season (based on current forecast payout for 2014/15, which may change)
• US Class III (cheese milk) prices down over 27% since peak in Sept 14 – but many farmers have hedged.
Milk prices - NZ
• 2013/14 final Fonterra payout:• Milk price = NZ$ 8.65 per kg MS (February 2014)
• Dividend = NZ$ 0.10
• Total payout = NZ$ 8.75
• Current 2014/15 forecast payout:• Milk price = NZ$ 4.70 per kg MS (10th December forecast)
• Dividend = NZ$ 0.25 to 0.35
• Total payout = NZ$ 4.95 to 5.05
• Drop by 42-43%
Irish milk prices
Irish milk prices down nearly 8c/l (21%)VAT refund on Dec price, paid in Jan, should addapprox 0.06c/l to current VAT incl. milk prices.Not all co-ops have passed this back, check your milk statement!
Average December price incl.
VAT = 30.73c/l
Outlook for milk prices?
• Though recovery appears genuinely underway, current returns remain weak.• IDB equivalent is 28.66c/l incl. VAT• EU average gross returns (before proc. costs) are 32-33c/l• Price paid by co-ops average 30.73c/l incl VAT (Dec 2014)• GDT (3rd Feb) SMP/butter equivalent is: 35.09c/l ; WMP is
31.18c/l; Irish equivalent product mix around 31-32c/l (due to weak GDT Cheddar prices)
• UK developments? • Distress milk (farmers who played the market when at peak, now
without a home) is keeping milk prices down except for those directly contracted to retailers for liquid milk
• Impact on cheese market – cheap milk available, causing pressure
• Likelihood of further price reductions?• Current returns might suggest so, but change in market
sentiment and dairy price directions will make it more difficult.
• EU supply growth after 31st March? Continued US supply growth?