Back to top 1 January 9, 2017

DAIRY COMPANIESCHINA: Mengniu bids to secure supplyVIETNAM: F&N to up share of VinamilkFRANCE: Lactalis launches buyout offerPEOPLENZ: New leader for NZX AgriCANADA: Saputo’s new CFOPAKISTAN: Engro Foods interim CEO namedFARMGATE ISSUESAUS: Hay prices softAUS: Productivity to drive dairyINDUSTRY STAKEHOLDERSNL: Dutch dairy cull will affect 2017 marketsEU: Signs of recoveryEXPORTS AND TRADEEU: No sale of SMP tenderGDT: Soft start to 2017AUS: China FTA gives cheese edge over USMANUFACTURING R&DNZ: Milk production constrainedUS: November production up 2.4%EU: October milk production down 3.6%MARKETINGNZ: Lewis Road drops legal actionCONSUMERCHINA: Less satisfaction with milkNZ: Fonterra milk prices on riseINDIA: Highest dairy consumption

THE YEAR AHEADWelcome to 2017. Signs of continued recovery showed promise leaving

2016 but questions will linger into the new year.Milk production from major exporting nations

– besides the United States – continue to record a contraction.

Milk production in the European Union for October appeared to show the successful impact of the milk reduction scheme, with a drop of 3.6%.

Farmgate prices in the EU improved in the second half of the year, but when and will this be enough to see a turnaround in milk volumes? Milk production for the year to October was still 1.2% above the same period a year ago and the European Commission forecasts the year will end 0.9% above a year ago.

This year, the Netherlands has some challenges with the phosphate reduction scheme, which will result in a 6% reduction of the herd. The impact on milk production won’t be as high, with lower producing animals going first. A certain number will be destined for export to dairy herds in neighbouring countries.

New Zealand milk production for November was down 5.3% and volumes will likely be down for the rest of the season, now the peak has passed and pasture growing conditions are not optimal. For the season to date, milk production has fallen 3.7%. A promising payout of more than $6 will be encouraging farmers to set the foundations for the following season.

Australian milk production volumes are dismal and will remain that way for the rest of the season. Low milk prices and the severe impact of weather events

have forced farmers to cut right back to be sustainable. October milk production was back 11.4% and for the season to date is back 10.3%.

The US is the only nation showing consistent growth each month. November milk production was up 2.4% with year-to-date volumes up 1.8%.

Stock levels in Europe and US have been the elephant in the room and will remain so for some time. November stocks of both butter and cheese were both pulled down by a larger amount than normal with butter stocks reducing almost 30% on October. Will exports and local demand be enough to cater for the growth in production?

European stocks of skim milk powder sitting in intervention are a concern, although the European Commission has demonstrated it won’t undersell the product, which would hinder any chance of a recovery.

In the first tender only 40 tonnes of product sold and the second round, ending January 3, sold no product. The Commission has expressly said it won’t sell the product at less than market value, with the minimum price on the first tender being €2151/t. There is still 355,040t of product waiting to be released back to the market, and market participants will be watching this closely.

The level of volatility in the market has been made more apparent in 2016 and this is an accepted part of doing business now, as shown by record volumes of trades being placed in dairy derivatives markets around the globe.

Steph Holloway, editor

Dairy WeekA wholly owned

subsidiary of NZX Limited.NZX Agri

8 Weld Street, Feilding 4702New Zealand

Freephone 0800 85 25 80Phone +64 6 323 7104

Fax +64 6 323 7101www.dairyweek.com

The results at this week’s Global Dairy Trade (GDT) event has meant whole milk powder (WMP) is now not necessarily the most profitable option for a manufacturer of dairy commodities.

Fonterra had again lifted its offer volumes of WMP ahead of the January 3 GDT event, saying that this move reflected continued higher returns for WMP. However there was not enough buyer demand at the higher price levels to soak up the extra volume and as a result the WMP Price Index fell 7.7%. The average price achieved was US$3294/t.

This means a mix of skim milk powder (SMP) and milkfat – either as anhydrous milkfat or butter – has become a slightly more profitable option than WMP.

Based on the average prices achieved at GDT for each product, a SMP/butter mix would achieve a price of about US$3350/t while an SMP/AMF mix would achieve a price of about US$3370/t.

The gap between SMP and WMP has now also narrowed considerably, moving from over US$1000/t at the beginning of December to closer to US$600/t this week.

While dairy commodity prices have come back this week, we still expect a $6/kg MS milk price to be achievable, with the AgriHQ forecast currently $6.37/kg MS. Overall, dairy commodity prices are expected to remain relatively stable through to the end of the season, supported by lower milk intakes.

DAIRY MARKET REVIEW JANUARY 9, 2017

AGRIHQ COMMENTARY:

AgriHQ USD per tonne

January 9, 2017 www.dairyweek.com

The weekly bulletin on the Australian and New Zealand dairy industry and international markets

DAIRY WEEK

06-Jan-17 30-Dec-16 23-Dec-16 16-Dec-16 09-Dec-16 08-Jan-16

Butter 4300 4300 4300 4300 4300 3400

Skim Milk Powder 2750 2650 2650 2600 2650 1900

Whole Milk Powder 3350 3600 3600 3600 3600 2350

Cheddar Cheese 3950 3850 3850 3800 3800 3000

Casein – Acid 7600 7700 7700 7500 7500 6500

Back to top 2 January 9, 2017

DAIRY COMPANIES

CHINA: Mengniu bids for China’s largest raw milk producerAgriMoney, William Clarke, January 5, 2017

Chinese dairy giant China Mengniu moved to tighten control on its milk supply, with a takeover bid for China Modern Dairy, the country’s largest raw milk producer.

China Mengniu said the deal would help it secure stable supplies of high quality milk, noting China Modern Dairy’s stringent quality standards.

Mengniu’s move to secure its supply chain follows a profit warning, caused in part by the need to sell-off milk powder inventories in order to increase working capital.

FULL STORY

Singapore-based food and beverage group Fraser and Neave is looking to further increase its stake in Vinamilk, Vietnam’s largest dairy business.

F&N, the second-largest investor in Vinamilk behind the Vietnamese government, is planning to buy about 1.5% of the company’s shares. If the transaction is approved, F&N will own about 17.8% of Vinamilk.

The group’s plan to up its stake in Vinamilk was announced on December 28. It came just a fortnight after F&N increased

its shareholding from just over 10% to 16.35%. The company bought those shares from Vietnamese sovereign investment fund State Capital Investment Corporation, which had decided to sell part of its 45% stake in Vinamilk. F&N paid SGD9.05 a share for that tranche of Vinamilk. It did not detail what price it would pay in its latest proposed transaction.

FULL STORY

VIETNAM: Fraser and Neave eyes more Vinamilk sharesJust-food, Dean Best, January 3, 2017

Another maker of infant formula has listed on the ASX with hopes of expansion in Asia.

Shares in Bubs Australia Limited jumped by more than a third when it debuted in a backdoor listing today.

A short time ago, the 10 cent shares were trading at 13.7 cents.

Bubs joins several other listed formula makers. Bega Cheese and a2 Milk report steady sales but Bellamy’s, an organic infant formula maker, has been hit by recent changes in regulations in China.

FULL STORY

AUS: Another infant formula company lists on the ASX, shares jumpBusinessInsider, Chris Pash, January 3, 2017

France’s Lactalis, the world’s largest dairy firm, said on Tuesday it was launching a buyout offer for shares in Italian group Parmalat it does not already own, with the aim to delist the company from the Milan stock exchange.

The announcement comes as French media group Vivendi’s raid on Silvio Berlusconi’s broadcaster Mediaset has rekindled concerns about Italian companies falling into foreign hands.

Lactalis for years denied speculation it planned to delist Parmalat, which was relaunched in 2005 after going bankrupt

following a financial scandal two years earlier, to have free rein in running the group.

In a statement on Tuesday, Sofil, the investment vehicle of the Besnier family that owns Lactalis, said it would continue to support Parmalat’s growth, adding this goal would be easier to reach with a smaller shareholder base.

FULL STORY

FRANCE: Lactalis launches buyout bid to delist ParmalatReuters, December 27, 2016

Back to top 3 January 9, 2017

DAIRY COMPANIES

FrieslandCampina flagged its purchase of control of Engro Foods as one of the single largest foreign investments in Pakistan of late as the Dutch group revealed the deal would cost it a little more than it had expected.

FrieslandCampina said it had made a total investment of €430 million ($450m) in acquiring its 51% stake in Engro Foods, Pakistan’s second largest dairy producer.

The sum is €10m more than the group said in August that it expected to pay for the holding, and is equivalent to nearly the same as Engro Foods’ revenues, which FrieslandCampina has said are about €450m.

FULL STORYFULL RELEASE

PAKISTAN: FrieslandCampina’s Engro takeover ‘defining moment’ for PakistanAgriMoney.com, Mike Verdin, December 20, 2016

Fonterra Co-operative Group, the world’s largest dairy export company, has recently invested 20 million ringgit ($4.4m) to improve operating layouts at two Malaysian plants.

The New Zealand group’s move will boost blending capacity at the Susumas plant – its first in Malaysia, built in 1992 – and reduce dependence on third parties. The plant can produce and pack an annual 30,000 tonnes of milk powder for brands

including Anlene, Anchor, Anmum and Fernleaf, all market leaders in Malaysia.

“We don’t have sufficient blending capacity to meet the packaging capacity,” Jose Miguel Porraz Lando, managing director of Fonterra Brands Malaysia, told reporters recently.

FULL STORY

NZ: Fonterra invests $4.4m in Malaysian dairy operationsAsian Review, December 24, 2016

German dairy group DMK is to expand its existing dairy plant at Strückhausen in Lower Saxony to create a “forward-looking production site” for baby food by the end of 2017.

A DMK spokesperson said the expanded facility would also take on production of the group’s Humana infant formula brand, which to date has been manufactured at its Herford joint venture operation with German baby food maker Hipp in

northern Germany.Hipp said earlier this month it had acquired full control of

operations at Herford under a deal with DMK, but declined to discuss whether Humana would continue to be produced at the site.

FULL STORY

GERMANY: DMK plans baby food production at expanded German plantJust-food, John Shepherd, December 19, 2016

Swiss dairy company Emmi is growing in the goat milk product industry again, taking over companies in the United States and Spain.

In December, Emmi bought an 80% stake in Spanish goat milk processor Lacteos Caprinos SA.

Now, the company has agreed the takeover of American

family company Jackson-Mitchell (Meyenberg).Emmi has been gradually expanding its international goat

milk network since 2010, when it acquired Cypress Grove in California and the Le Petit Chevrier brand in Switzerland.

FULL STORY

SWITZ: Emmi takes over two more goat milk companiesDairyReporter.com, Jim Cornall, January 5, 2017

Back to top 4 January 9, 2017

DAIRY COMPANIES

The acquisition of WhiteWave by international dairy giant Danone has received final clearance by the European Commission under the EU Merger Regulation.

The estimated $12 billion merger gained clearance from the European Commission under the condition that Danone would divest from its growing-up milk business in Belgium.

Growing-up milk products are intended for children between one and three years old and are intended to compensate for

any nutritional deficiencies that might occur in the transition phase of infant nutrition to the overall family diet.

The growing-up milk market includes both dairy and plant-based products, including WhiteWave’s Alpro brand, headquartered in Belgium.

FULL STORY

EU: Danone and WhiteWave merger cleared by European Commission with divestment of growing-up milk in BelgiumDairyReporter.com, Mary Ellen Shoup, December 16, 2016

The corporate parent of Rochester Cheese is merging with one of the largest dairy cooperatives in the Midwest.

Rochester Cheese, which employs 55 workers, is a subsidiary of Davenport, Iowa-based Swiss Valley Farms.

On Friday, Swiss Valley Farms announced it had signed an agreement to merge with Prairie Farms Dairy.

The deal still needs to be approved by co-operative members of both Prairie Farms and Swiss Valley. The leaders of the co-

operatives hope it will be approved by mid-2017.If approved, Swiss Family’s five cheese and whey powder

manufacturing plants in Rochester, Faribault, Luana, Iowa, Shullsburg, and Mindoro, would operate under the Prairie Farms name. However, Swiss Valley Farms chief executive Chris Hoeger would continue to manage the five plants.

FULL STORY

US: Rochester Cheese parent to merge with Prairie FarmsPost Bulletin, Jeff Kiger, December 21, 2016

Lactalis has struck a deal to buy Romanian dairy business Covalact, with the acquisition set to be the second the French giant has made in the country in 2016.

A spokesperson for the privately-owned Lactalis confirmed the move today.

“This is another step in our development in this country,” the spokesperson said.

The spokesperson declined to comment on the price Lactalis was set to pay for Covalact, which is controlled by US investment fund SigmaBleyzer. Officials at the fund’s office in Bucharest had not responded to a request for comment at the time of writing.

FULL STORY

ROMANIA: Lactalis to make Covalact latest dairy deal in RomaniaJust-food, Dean Best, December 20, 2016

Asahi Group Holdings will unload its shares in a dairy company and farm business in China, as it realigns its assets to focus on strategic growth fields.

Asahi will sell the stakes to Chinese company New Hope Dairy for an estimated sum of a little over 1 billion yen ($8.49 million). The transaction is to be completed this winter.

The businesses in Shandong Province produce milk using

Japanese technology, and about 30 kinds of vegetables throughout the year using minimal amounts of farm chemicals. The products, sold in the area as well as such cities as Shanghai and Beijing, were popular as upscale items.

FULL STORY

CHINA: Asahi to sell stakes in Chinese farm, dairy outfitsAsian Review, December 22, 2016

Back to top 5 January 9, 2017

DAIRY COMPANIES

Barry Callebaut has completed its acquisition of a chocolate plant from Mondelez International, which produces Cote D’Or.

Barry Callebaut said the facility in Halle, Belgium, would capitalise on the fast-growing ‘Made in Belgium’ speciality chocolate and fillings market.

The acquisition was finalised following completion of works council consultations and closing conditions.

The factory in Halle would be integrated into Barry Callebaut’s global manufacturing network and expand the company’s production capacity for Belgian chocolate and fillings.

FULL STORYFULL RELEASE

BELGIUM: Barry Callebaut completes acquisition of Mondelez’s Cote D’Or plantFoodNavigator.com, Jenny Eagle, January 3, 2017

French dairy giant Danone has lowered its forecast for annual sales on an organic basis, citing market conditions in Spain and the performance of its Activia brand.

Danone said it now anticipated its full-year organic sales to be slightly below target because of the below expectations performance of its fresh dairy business in Spain, which accounted for about 5% of group sales.

“In the fourth quarter, Activia’s performance, as well as aggravated market conditions in Spain, have impacted Europe

dairy results,” the company noted. “The implementation of Activia’s new brand identity across Europe has been well-received by consumers and Danone will continue to build on it. Nevertheless, local execution plans are being reworked and teams have already started to implement them country by country.”

FULL STORY

FRANCE: Danone lowers sales guidance but upbeat on marginjust-food, Katy Askew, December 19, 2016

FrieslandCampina, the Netherlands-based dairy group, is looking to expand the geographical presence of infant formula brand Dutch Lady in China in 2017.

The co-op launched Dutch Lady in China in September and the formula was on sale in more than 50 Chinese cities, in [the] Hunan, Sichuan and Chongqing markets, a spokesperson for the company’s Chinese business said.

Next year, FrieslandCampina, which manufactures the Dutch Lady on sale in China locally, is planning to try to grow the presence of the brand further, hoping to benefit from changes in regulations governing the country’s infant formula sector.

FULL STORY

CHINA: FrieslandCampina to expand Dutch Lady infant formula distribution in ChinaJust-food, Dean Best, December 23, 2016

Baby formula company Bellamy’s has extended its trading suspension on the ASX until the middle of next month.

In a statement to the exchange, the company said its shares would remain suspended until January 13, or until it made an announcement to market about its financial position.

Bellamy’s said the suspension had been extended while it

continued negotiations with key suppliers and manufacturers.The company said it needed time to determine what the

impact of those negotiations would be on its expected financial results.

FULL STORY

AUS: Bellamy’s extends share trading suspensionABC, Sue Lannin, December 21, 2016

Back to top 6 January 9, 2017

DAIRY COMPANIES

Businesswoman Jan Cameron is part of a push to remove Bellamy’s independent directors after the company lost half its value in a sharemarket rout late last year.

Kathmandu founder Cameron has been a long-term investor in the Tasmanian-based infant formula producer and is now seeking a place on the company’s board.

The Black Prince Private Foundation, an investment vehicle

that owns 14.48% of Bellamy’s shares, delivered a notice to the company on December 30 requisitioning a general meeting for the purpose of removing four of its independent, non-executive directors.

FULL STORY

AUS: Bellamy’s faces Jan Cameron-backed shareholder motion to remove directorsABC, Michael Janda, January 4, 2017

Progress on the construction of the Mataura Valley Milk factory has got off to a good start in 2017.

Construction began at the site near McNab in Gore last month, where the factory will be used to make infant milk formula.

Mataura Valley Milk general manager Bernard May said there was very good progress made before Christmas.

May said the site establishment was complete, with a 50

metre-high static crane having been erected to start work on the building.

Construction on the boiler house and service buildings had begun, with work on the main warehouse to begin later in January.

FULL STORY

NZ: Mataura milk plant on scheduleStuff.co.nz, Tim Newman, January 5, 2017

Mexico’s Lala and Costa Rica’s Florida Ice and Farm have announced an alliance to break the Dos Pinos monopoly on milk and dairy products in Costa Rica.

The largest dairy in Latin America, in a strategic agreement (alliance) with Florida Ice and Farm (Fifco), aims to break Costa Rica’s diary monopoly held by Dos Pinos.

Mexico’s Grupo Lala and Costa Rica’s Fifco, who entered the

milk market with the Mu brand in 2012, with the purchase of Coopeleche, made the announcement on Wednesday.

The alliance is expected to give Dos Pinos strong competition in a market it has held for its own for the past seven decades.

FULL STORY

STH AMERICA: Milk and dairy war heats up in Costa RicaQCostaRica, December 29, 2016

The Supreme Administrative Court ruled Thursday to uphold a decision by Finland’s Market court to impose a €70 million fine on Finnish dairy company Valio, for abusing its then-dominant market position to sell milk at below-production wholesale prices.

The ruling marked the close of the final chapter in a legal dispute involving the Finnish dairy company, local competition authorities and main competitor, Denmark-headquartered Arla, over wholesale milk prices in Finland.

The Court found that between 2010 and 2012, Valio exploited its market leader position to sell raw milk at below-market prices.

The decision means Valio’s competitors may now seek damages from the company in the Helsinki District Court, in a process that could potentially take years.

FULL STORY

FINLAND: Milk war ends as court upholds €70 million fine on Valioyle.fi, January 1, 2017

Back to top 7 January 9, 2017

DAIRY COMPANIES

A feared chemical gas leak at Fonterra’s factory at Hautapu in Waikato has turned out to be a blown high-pressure air hose.

Seven fire appliances, including a hazardous materials unit from Hamilton, were called to the factory on the outskirts of Cambridge about 3.30am, over concerns of a possible gas leak.

Firefighters in chemical suits and wearing breathing gear

entered a service tunnel where they found the blown hose.Factory maintenance staff were accompanying firefighters

into the tunnel to fix the problem.

FULL STORY

NZ: False alarm over chemical leak at Fonterra plantNewsTalkZB, December 30, 2016

Dairy farmers supplying Arla will receive a milk price increase on January 1.

The European farmers’ co-operative, which buys milk from about one in four United Kingdom dairy farmers, will increase its standard litre price by 1.68p to 26.31p a litre at the start of next month.

The company said most of the increase – 1.51p – was a result of an overall increase in the co-op’s European-wide price.

A smaller 0.17p a litre increase was also being applied because of the company’s exchange rate mechanism.

FULL STORY

UK: Arla to increase milk price on January 1Press and Journal, Gemma MacKenzie, December 22, 2016

The FrieslandCampina guaranteed price for raw milk for January 2017 is €34.50/100kg of milk, a decrease of €3 compared to December 2016 (€37.50).

In Irish constituents, this is the equivalent of a milk price of 33.34c/litre when converted.

In the guaranteed price of €37.50 for December a correction of €3.50 was included because of too-low estimated prices of

the reference companies in recent months of 2016.It is expected the prices of almost all commodities will

increase slightly.

FULL STORYFULL RELEASE

NETHERLANDS: Dutch dairy FrieslandCampina cuts January guaranteed milk priceAgriLand Amy Forde, January 1, 2017

Dairy farmers supplying First Milk will receive a price increase on January 1.

The Glasgow-headquartered farmers’ co-operative will increase its A price by 2p a litre at the start of next month.

The price increase will bring the Scottish mainland pool price up to 25.24p/l.

First Milk, which has four manufacturing sites across Scotland, England and Wales, said the price increase was a result of an improvement in both market returns and the performance of the business.

FULL STORY

UK: First Milk confirms January milk price increasePress And Journal, Gemma MacKenzie, December 30, 2016

Back to top 8 January 9, 2017

DAIRY COMPANIES

Muller has followed a 2.5ppl January milk price increase with a further 1.25ppl, which will apply from February 1, 2017.

This is the fifth consecutive price increase for Müller’s non-aligned suppliers, who have seen their milk price increase by an average of 45% since October 1, 2016.

Non-aligned farmers continue to benefit from a separate

additional retail supplement estimated at 0.82ppl for February. When added to the standard litre price of 26.69ppl this leads to an actual price paid for February milk supply of 27.51ppl.

FULL STORY

UK: Muller increases February milk prices by further 1.25p per litreFarming UK, January 6, 2017

Back to top 9 January 9, 2017

PEOPLE MOVEMENTS

NZ: Appointment of new head of NZX Agri businessNZX, December 23, 2016

NZX is pleased to announce the appointment of Jeremy Anderson as Head of NZX Agri effective March 1, 2017.Jeremy will lead NZX’s reshaped Trans-Tasman agri business which comprises data and analytics businesses in

New Zealand and Australia, along with the NZ Farmers Weekly publications business.

FULL STORY

Saputo, the Canada-based dairy group, says chief financial officer and secretary Louis-Philippe Carrière is to retire in August after 30 years with the company.

Carrière will be succeeded by Maxime Therrien, who is the company’s executive vice-president for finance and administration.

Therrien joined the company in 1996 and has held several

senior management positions in finance and administration, both at the divisional and at the corporate level. In his new role, Therrien will report to Saputo chief executive and board vice-chairman Lino Saputo.

FULL STORY

CANADA: Maxime Therrien to succeed Louis-Philippe Carriere as Saputo CFOJust-food, John Shepherd, December 19, 2016

FrieslandCampina has named its vice president of M&A, Hans Laarakker, as interim chief executive of Engro Foods, the Pakistan dairy company in which the Dutch dairy giant has acquired a 51% majority stake.

Laarakker’s appointment became effective today, as FrieslandCampina formally completed its deal to invest in Engro.

He replaces Babur Sultan, who FrieslandCampina said had decided to leave Engro after spending a decade in senior leadership roles within the company since its inception.

FULL STORY

PAKISTAN: FrieslandCampina’s Hans Laarakker named interim CEO of Engro FoodsJust-food, John Shepherd, December 20, 2016

The outgoing chairman of German dairy co-operative DMK, Otto Lattwesen, has died a day before he was due to formally step down from the company.

DMK said Lattwesen died as the result of a tragic accident on December 30, shortly before his 66th birthday and the planned transition to a successor. He leaves a widow and two children.

Lattwesen served as chairman since 1999, initially as chairman of German co-operative Nordmilch, which merged with Humana in 2010 to create DMK.

DMK announced in June Lattwesen and chief executive Dr Josef Schwaiger were stepping down as part of a generational change at the firm. DMK said then Schwaiger would be succeeded by Ingo Mueller, the managing director of the group’s ingredients, agriculture and commodities operations, while a successor to Lattwesen would be chosen at a later date.

FULL STORY

GERMANY: Chairman of Germany’s DMK dairy group diesjust-food, John Shepherd, January 3, 2017

Back to top 10 January 9, 2017

FARMGATE ISSUES

AUS: Hay prices: Demand weak for huge haulWeekly Times Now, Fiona Myers and Simone Smith, January 4, 2017

Hay prices are remaining soft amid reports of big licks of pasture being made into fodder.The industry’s peak body concedes it has no idea of the increase in hay-making this season but Australian

Fodder Industry Association chief executive John McKew said members were reporting supply would be well up on last year.

“Supply is very strong, and growing, and demand is very low which means prices are down,” McKew said.“Add to this that quality this year is reportedly down on last year due to a very wet spring and inclement weather

leading into some areas into summer, and this is adding to a reduction in prices.”

FULL STORY

Efficiencies and productivity are likely to be key requirements for farmers in the dairy industry in the future, dairy businessman Mike Carroll believes.

“Every agricultural industry in Australia faces volatility and each one has similar issues around what prices are going to do,” Carroll said.

“What that means is you have to have inherently low-cost

structure, so your cost of producing milksolids has to be really low and competitive.

“The challenge is that all of your inputs keep going up.“That means you have got to adjust your underlying

productivity and keep making improvements.

FULL STORY

AUS: Productivity will drive dairySheppnews.com, Geoff Adams, December 5, 2016

In a series of articles, AHDB is looking at how farmgate prices across Europe respond to movements in European wholesale commodity prices. The first article is available here. In this second article, we will look at how the United Kingdom has fared compared with other EU member states.

UK farmgate prices are, on average, less responsive to commodity markets than the other main EU milk-producing countries, particularly when markets are rising. AHDB analysis

compares the scale and timing of how movements in European AMPE have impacted on farmgate prices across Europe. The results are split between the impact on a rising market (May 2012 to Dec 2013) and the impact on a falling market (Jan 2014 to Jul 2016).

FULL STORY

UK: Farmgate prices less responsive than European counterpartsAHDB Dairy, January 4, 2017

The Irish Farmers Association says there is scope for further increases in milk prices in the coming months.

IFA national dairy chairman Sean O’Leary said Irish co-ops had increased their milk prices by an average of 5.5c/litre in the last five months. However, he also highlighted that over the same period two of the largest European co-ops, Arla and Friesland Campina, increased their prices by 7.5c/kg and

12.5c/kg respectively.“With dairy markets remaining strong, there is scope for

further milk price increases for Irish dairy farmers for this month’s milk and the coming months’,” O’Leary said.

FULL STORY

IRELAND: Are Irish dairy farmers being short-changed on milk prices?Irish Independent, Ciaran Moran, December 27, 2016

Back to top 11 January 9, 2017

INDUSTRY STAKEHOLDERS

NETHERLANDS: Dutch dairy cull will affect 2017 marketsIrish Examiner, Stephen Cadogan, January 5, 2017

It has been estimated the Dutch dairy herd will have to be cut by 100,000 cows, or 6% of the total herd, to meet environmental limits on phosphates.

Much of this is on course to take place in 2017, with immediate effect on the EU milk market – and on the beef market, because of dairy cow slaughtering.

If the European Commission accepts the latest Dutch plan, cow culling will get under way in March, and will continue throughout 2017, with the Dutch dairy farming sector changing to a phosphate rights system on January 1, 2018, in order to continue limits on phosphate production.

FULL STORY

The Members’ Council of FrieslandCampina supports the intended phosphate reduction plan for the dairy sector that is expected to come into force in March 2017.

In the build-up to the phosphate reduction plan for the dairy sector, the Members’ Council also agreed with a temporary standstill measure in the Netherlands on the basis of exceptional circumstances.

With this measure, FrieslandCampina wants to stimulate its member dairy farmers to start working towards the target of the

dairy sector plan. The measure will also help to keep milk supply and available processing capacity in balance. The temporary standstill measure will come into force on January 9, 2017.

In its capacity plan for 2017 FrieslandCampina reckoned with the coming into force of the phosphate rights system as of January 1, 2017, which was however postponed until January 1, 2018.

FULL RELEASE

NETHERLANDS: FrieslandCampina supports phosphate reduction plan for dairy sectorFrieslandCampina, December 21, 2016

The crisis in dairy farming is nearly over, European Union agriculture commissioner Phil Hogan says.

And he says this is in part because of more than €1 billion of EU support pumped into the industry over the last two years.

“The good news is that for some months now we have seen signs of recovery,” the commissioner said in a speech to the European Dairy Association in Nice, France.

He said global demand was picking up, most notably for butter and cheese.

“The long-awaited reaction from the supply side finally materialised in the EU starting in June this year.”

FULL STORY

EU: ‘Signs of recovery’: Dairy crisis is nearly over, EU commissioner Hogan saysFarming UK, December 22, 2016

Back to top 12 January 9, 2017

INDUSTRY STAKEHOLDERS

Dairy commodity prices recovered in 2016 – and how – as the market slump of the previous two years at last put the brakes on output.

The recovery was also helped by renewed interest by Chinese buyers, after inventories run up during a 2013-14 buying spree eroded.

Prices, as measured by the Global Dairy Trade index,

rebounded by 47%, making dairy one of the strongest markets of the year – albeit the index remained well below a 2013 peak.

But will values continue in 2017 to track towards that high? Or will higher prices boost output and stem the recovery?

Expert commentators give their views.

FULL STORY

Dairy prices – will their recovery continue in 2017?AgriMoney.com, Mike Verdin, December 28, 2016

United States dairy organisations have backed a Congressional letter urging the Food and Drug Administration to investigate the branding of plant-based dairy alternatives.

The letter, written by Representatives Mike Simpson and Peter Welch, urged FDA commissioner Robert Califf to more aggressively police the improper use of dairy terms used on the labels of products without dairy ingredients.

“We request that the FDA exercise its legal authority to investigate and take appropriate action against the manufacturers of these misbranded products,” the congressmen urged.

FULL STORY

US: US dairy industry backs crackdown on labelling of dairy alternativesJust-food, Katy Askew, December 19, 2016

Russia may lift some of its counter sanctions, provided the products or services let into the country do not hurt domestic businesses, Agriculture Minister Alexander Tkachev said.

Russia imposed its sanctions in response to the measures introduced against it by Brussels, Washington and their allies in light of Crimea’s reunification with Russia in 2014 and because of Moscow’s alleged involvement in the internal Ukrainian conflict, a claim that Russia has repeatedly denied.

According to Tkachev, even in case of a successful political

solution to the conflict, the counter-sanctions would not be lifted all at once, but gradually.

Russian Prime Minister Dmitry Medvedev said that the representatives of the country’s agricultural and industrial sectors asked not to lift the counter-sanctions, because they served as a boost to the Russian economy.

FULL STORY

RUSSIA: Russia may start to selectively lift counter-sanctions – Agricultural MinisterSputnik News, December 16, 2016

Beginning in January, representatives of the United States Department of Agriculture’s National Agricultural Statistics Service (NASS) will visit dairy farms across the nation as the agency begins collecting data for the final phase of the 2016 Agricultural Resource Management Survey (ARMS).

ARMS is a joint effort between NASS and USDA’s Economic Research Service. The survey is an annual programme that gathers in-depth information on the production practices, costs and financial well-being of American farm families. ARMS

targets select commodities on a rotational basis. This year, the survey places additional focus on corn and the conventional and organic dairy sectors. The last time ARMS focused on the dairy sector was in 2010, and that was only on the conventional dairy sector. This will be the first time ARMS includes an additional focus on organic dairy production.

FULL STORY

US: USDA to measure financial well-being of the dairy sectorFeedStuffs, December 27, 2016

Back to top 13 January 9, 2017

INDUSTRY STAKEHOLDERS

Giant piles of black manure towering over cornfields, while rancid-smelling effluent from thousands of cows spills on to the land – this is the price of a glass of milk in China today.

Large-scale dairy farms have boomed in the Asian giant, as its near 1.4 billion consumers overcame centuries of cultural reluctance to embrace the white liquid.

An economic boom and government backing transformed dairy into a $55b a year industry, shifting production away from small-scale producers towards massive mega-farms with up to 10,000 cattle – and a lot more waste.

FULL STORY

CHINA: China’s giant cow farms leave neighbours up milk creek9News, December 27, 2016

France rolls out its two-year trial for mandatory country of origin labelling for meat and dairy in prepared foods this month.

The initiative concerns ready meals with a certain amount of meat or milk in them.

If dishes contain more than 8% meat and 50% milk their origins must be mentioned on the label.

Only meals with 100% French meat or French milk can

contain the label “Produit d’origine Française”. Interbev, a French trade association that represents meat

processors and livestock, said it was pleased with the significant advances made, giving consumers clear and transparent information on the products they buy.

FULL STORY

FRANCE: France meat and dairy ‘country of origin labeling’ trial comes into forceFoodNavigator.com, Jenny Eagle, January 2, 2017

Australia’s newest airport hopes to launch freight flights to Korea this year to take advantage of emerging export markets for Queensland primary producers.

It comes after Cathay Pacific started a weekly jumbo service to Hong Kong from Toowoomba’s Wellcamp Airport, west of Brisbane, in November.

Wellcamp is Australia’s largest privately-built airport and was completed in late 2014 after an 18-month construction phase.

Food Leaders Australia chief executive Ben Lyons said the new freight service would help primary producers take advantage of the free trade agreement with Korea.

“The three north Asian free trade agreements are starting to kick in quite well,” he said.

FULL STORY

AUS: Wellcamp Airport sets sights on direct flights to Korea, expanding opportunities for primary producersABC, Jodie Gunders, January 3, 2017

Back to top 14 January 9, 2017

EXPORTS AND TRADE

EU: ‘No sale’ on latest skim milk powder tenderAgriLand, Richard Halleron, January 6, 2017

EU Member States have agreed on not selling skim milk powder out of public intervention this week.This decision was taken on the back of a recommendation from the European Commission.Offers were received for a total of 11,914 tonnes, but the price range was too far from the prevailing market

price and from the minimum selling price set at the previous tender.Brussels has confirmed that 21,962t are available for the next tender on January 17.

FULL STORY

Dairy markets have had a bearish start to the New Year with prices falling at the first Global Dairy Trade (GDT) event for 2017. The GDT Price Index dropped 3.9% at the January 3 event on the back of weaker prices for whole milk powder (WMP).

The WMP Price Index dropped 7.7% to sell at an average price of US$3294/tonne. It appears there simply weren’t enough buyers willing to pay any higher prices to absorb the extra supply on offer.

Fonterra made 12,850t of WMP available, having lifted its offer volumes by a further 5% last week. This meant there was 6% more WMP available for buyers than at the previous auction. However, the volume available was still less than was offered at this time a year ago.

FULL STORY

GDT: Soft start to 2017 for dairy marketsAgriHQ Pulse, Susan Kilsby, January 4, 2017

Milk prices on the Global Dairy Trade edged down, as Chinese buying eased off after rushing to take advantage of a low-tariff window.

Prices at the GDT auction were down 0.5% from the 17-month highs reached at the last event, held two weeks ago.

Prices for benchmark whole milk powder (WMP) were down 0.8%.

But despite the slight decline, Robbie Turner, head of European markets at broker Rice Dairy, called the result “very much neutral” noting more WMP was made available.

Turner also noted recent auctions had seen buying from China in order to take advantage of a low-tariff window in January.

“We’ve seen concentrated buying, and now that we’re past that there’s a bit of sentiment that things will quiet down slightly.”

But Turner said “I don’t expect there to be a massive drop. They’re not overstocked.”

FULL STORY

GDT: Dairy prices edge down, as Chinese buyers back offAgriMoney.com, December 21, 2016

Back to top 15 January 9, 2017

EXPORTS AND TRADE

Fonterra has announced it is increasing its forecast offer volumes of whole milk powder (WMP) on Global Dairy Trade by another 5000 tonnes over the next 12 months.

In a statement to the market, Fonterra said the lift reflected the continued higher returns for WMP at current prices. Fonterra is using its flexibility in production to move milksolids out of other products and into WMP. The company continues to forecast milk intakes that are 7% down on last season.

WMP offer volumes for the next GDT event on January 3 have been lifted 5% from forecast, to total 12,850t. The increases are in Contracts 2, 3 and 4, that is, product to ship between March and May. This volume is also 6% higher than the amount of WMP offered at the last event on December 20.

FULL STORY

NZ: Fonterra hikes WMP offer volumes AgriHQ Pulse, Amy Van Ossenbruggen, December 29, 2016

Last week, EEX recorded a new high on its derivatives market for dairy products. From December 19 to 23, 2016, a total of 5030 tonnes of goods equivalent (1006 contracts) was traded in these products.

The total volume includes 40t of goods equivalent (8

contracts) that were traded on December 23 in butter futures for 2018 maturities. This means, for the first time, contracts beyond 2017 were traded on the dairy market.

FULL RELEASE

EU: New weekly record on the derivatives market for dairy productsEEX, December 28, 2016

Non-tariff barriers are hindering Australian exports to China and must be removed to make the most of the free trade agreement between the two nations, industry says.

While the first year of the much-lauded deal brought impressive gains for some commodities, barriers around food safety standards and biosecurity are stopping others from getting the most out of the deal.

“We think going forward there’s a lot to the China-Australia free trade agreement we haven’t seen yet,” National Farmers’ Federation trade and economics general manager Scott

Kompo-Harms said.The non-tariff barriers needed to be worked on collaboratively

on with China, he said.Yesterday marked the first anniversary of ChAFTA coming into

force.Baby formula exports have more than quadrupled in the past

year, from $53.2 million to $233.6m.

FULL STORY

AUS: China FTA: Big gains for some but non-tariff barriers still in the wayWeekly Times Now, Natalie Kotsios, December 21, 2016

To see the benefits a free-trade agreement with China can bring, look no further than cheese.

Australian exports of cheese to the country, the world’s fastest-growing cheese importer, have grown in the past year, thanks largely to a trade deal between the two countries that went into effect at the end of 2015. Australia’s market share gain has come largely at the expense of United States cheese

makers, who are starting to worry.The plight of US cheese makers serves as a reminder that as

the debate over trade with China has centred on manufacturing, US farmers have just as much at stake. China remains the country’s largest market for agricultural goods.

FULL STORY

AUS: Free trade deal gives Australia edge over US in selling cheese to ChinaThe Australian, Lucy Craymer, December 30, 2016

Back to top 16 January 9, 2017

EXPORTS AND TRADE

A Chinese entrepreneur plans to export milk from his newly acquired Van Dieman’s Land Company in Tasmania, the largest farm in Australia, hoping that Chinese consumers will pay up to 15 times what Australians pay for their litre of milk, a Reuters report says.

Lu Xianfeng paid a top price of A$280 million (€196m) for the 17,000ha property after making his money from a textile

company that manufactures sun shades.Lu’s company announced plans to airfreight 50,000 litres of

fresh milk a week from Tasmania to Ningbo, the second-largest city in Zhejiang province.

FULL STORY

AUS: Fresh milk from Australia to China within three daysIrish Farmers Journal, John Boylan, December 18, 2016

The planned new air route linking Guangzhou and Mexico City is anticipated to enhance trade and travel between South China and the Latin American country.

China Southern Airlines plans to launch the Guangzhou-Vancouver-Mexico City route in May, flying Boeing 787 Dreamliners three times a week, the Guangzhou-based carrier says.

For almost 10 years Mexican agricultural products have been available to the Chinese market and recently they have

increased their penetration.Mexican products currently available in China include

avocados, nuts, raspberries, blackberries, abalone, lobster, beef and pork. The two countries are working on new agreements to bring more Mexican products such as dairy products – including baby formula – blueberries, bananas and mangoes to China.

FULL STORY

CHINA: Air route to boost trade with MexicoChina Daily, Li Wengfang, January 3, 2017

China would outlast the United States in a trade war, which is a distinct possibility next year after President-elect Donald Trump takes office, a commentator wrote in the $1 billion Pine River China Fund’s investor letter.

China’s government would be better placed than the US to marshal state resources to cushion the impact on exporters, James Wang, a City University of Hong Kong professor who pens a monthly commentary for the fund, wrote. Privately-owned Chinese exporters would be worse hit than state-controlled

peers because they had less political clout in Beijing, he said.“By design, decision-makers in a democracy face difficulties

co-ordinating a relief effort and must eventually face a political backlash from impacted domestic producers,” Wang wrote. “On this basis, the Chinese may have more runway to play the long game in a trade war.”

FULL STORY

CHINA: China would outlast US in trade war, Pine River letter saysBloomberg, Bei Hu, December 30, 2016

It appears December milk prices will be the highest of the year. The trade anticipates Class III and Class IV by the middle of the contract month with prices basically flat-lining for the duration of the contract.

Take a look at price charts for front-month contracts and you will see this. Sufficient pricing has taken place providing a fairly accurate idea of final announced price. An adjustment in the contract may take place with the release of the weekly Agricultural Marketing Service prices. But even with that, those adjustments are minor.

A December Class III price of $17.30 would be the highest price since December 2014, at which time milk prices were declining from their record highs. Stronger prices through the end of the year are contra-seasonal when many years are combined.

However he cautioned against farmers becoming too optimistic, reminding them of the boom-bust nature of the dairy industry.

FULL STORY

US: Highest milk price of the year in December?Milk Business, Robin Schmahl, December 19, 2016

Back to top 17 January 9, 2017

EXPORTS AND TRADE

The United States Dairy Export Council offers a preview of the new year, identifying the factors that will shape US dairy export opportunity.

After most political prognosticators so spectacularly botched their predictions during this year’s presidential election, forecasting the future feels even more treacherous than usual.

With that in mind, rather than offer a prophecy for dairy exports in 2017, the following five points are more akin to indicators.

These five factors will shape the strength of the US dairy export supply opportunity in the new year.

FULL STORY

US: Five key indicators for 2017 dairy exportsUSDEC, Matt McKnight, January 4, 2017

Rising skim milk powder/nonfat dry milk (SMP/NDM) shipments to Southeast Asia help position the United States for an overall dairy export volume gain in 2016.

If US dairy export volume finishes the year above 2015 volume – a likely scenario given trends over the most recent five months of data – US SMP/NDM sales to Southeast Asia will be one of the reasons why.

US suppliers have taken advantage of surging Philippine milk powder imports while also seizing market share in Indonesia, even though that nation’s overall SMP/NDM imports volumes are down.

FULL STORY

US: SMP/NDM exports to Philippines surgeUSDEC, December 21, 2016

After lying largely dormant for the last few years, United States trade policy is now back in the spotlight. In particular, concerns have been raised about our trade relations with Mexico and China, who together are the market for almost one-third of total US agricultural exports. Given this recent scrutiny, I thought it would be useful to review the current state of trade in US agriculture.

For all the talk about the US trade deficit, agriculture is

one industry where the US has a trade surplus – in FY2016, we exported $129.7 billion while importing $113.1 billion of agricultural goods. And despite a global slowdown in overall trade, US agricultural exports are increasing. In this coming year, this growth is expected to be led by increases in wheat and corn exports and an increase in raw soybean exports.

FULL STORY

US: A quick primer on US agricultural tradeDairy Herd Management, Katy Baylis, January 3, 2017

The milk import bill fell to US$798.6 million over the first ten months of 2016, against $1.07 billion during the same period of 2015, down by 25.45%, the Customs told APS.

From January to October, the imported quantities of this staple (milk powder, milk creams and dairy fats used as inputs) have also decreased to 324,206 tonnes against 364,531t, the equivalent of 11.06% decline between the two period of reference, the National Centre of Data Processing and Statistics

of the Customs said.The decrease in the import bill was driven by the decline in

the quantities imported and the fall in milk import prices.During the first eight months of 2016, the average import

price of milk powder stood at $2302 a tonne against $2921/t during the same period in 2015, down by 21%.

FULL STORY

ALGERIA: Milk import bill down 25.45% in first ten monthsaps.dz, December 19, 2016

Back to top 18 January 9, 2017

EXPORTS AND TRADE

Amul, Mother Dairy and other dairy majors are preparing to increase prices in the coming months and boost payouts to farmers.

The dairy majors are expecting a sharp drop in the stock of milk products to carry forward to the next fiscal year in April. They plan to raise milk and milk product prices and pass on the gains to farmers to encourage them to increase supplies, so they can stock up products for the summer months, a lean period for the production of fresh milk.

RS Sodhi, managing director of Gujarat Co-operative Milk Marketing Federation, which owns the Amul brand, said “By the end of March, carry-forward stock of skim milk powder will be 50% less than last year and hence we might have to again increase farmers’ prices, which will impact the price in the market. Consumers should be ready to pay more.”

FULL STORY

INDIA: Dairy products to increase prices in coming monthsRestaurant India, Author, December 27, 2016

Lower average retail prices for cheese, particularly for cheddar, offset higher sales, preventing any growth in the value of the retail cheese market in the year to November 2016. According to the last Kantar Worldpanel data, retail sales of cheese have grown by 3.8% in the 52 weeks ending November 6, 2016, driven primarily by growth in sales of soft continental-type cheeses. While prices fell year-on-year for all types of cheese, the 5.1% drop in the average price for cheddar meant the value of this segment fell by more than £50 million over the

period, negating any gains from other categories.While average cheese prices fell across the board, it was only

the top five multiples that also had a drop in sales volumes, losing market share to the hard discounters. The combined impact of a 3.1% drop in average prices and lower sales meant the top five multiples saw total value for cheese drop by almost £78m (-3.7%).

FULL STORY

UK: Higher sales but no value growth for cheeseAHDB Dairy, January 4, 2017

Co-operatives Working Together (CWT) has accepted 10 requests for export assistance from Dairy Farmers of America, Maryland & Virginia Milk Producers Cooperative Association, Inc., Michigan Milk Producers Association, Northwest Dairy Association (Darigold) and United Dairymen of Arizona. These member co-operatives have contracts to sell 436,515 pounds (198 tonnes) of cheddar, gouda and Monterrey Jack cheeses,

and 1.049 million pounds (476t) of butter to customers in Asia, Central America, the Middle East and North Africa. The product has been contracted for delivery in the period from December 2016 through to March 2017.

FULL STORY

US: CWT assists with 1.5 million pounds of cheese and butter export salesCo-operatives Working Together, December 27, 2016

Butter prices received for 25kg and 68lb boxes meeting United States Department of Agriculture (USDA) Grade AA standards averaged $2.10/lb for the week ending December 17, 2016. The United States (US) price per pound decreased 0.8c from the previous week.

Cheddar cheese prices received for US 40lb blocks averaged $1.83/lb, down 5.3c from the previous week. The price for US 500lb barrels adjusted to 38% moisture averaged $1.69/lb, decreasing 4.2 cents from the previous week.

Dry whey prices received for bag, tote, and tanker sales meeting USDA Extra Grade standards averaged 40.3c/lb, up 1.0c from the previous week.

Nonfat dry milk prices received for bag, tote, and tanker sales meeting USDA Extra Grade or United States Public Health Service Grade A standards averaged 96.7c/lb, up 1.1 cents from the previous week.

FULL REPORT

US: National dairy products sales reportUSDA, December 21, 2016

Back to top 19 January 9, 2017

EXPORTS AND TRADE

Milk remains in good supply for cheesemakers across the country.

Last week’s discounted milk prices in the Midwest have started to inch up, while cheese producers are using milk already on hand. A few processors in the West report seeking out additional loads, but milk is generally available. Cheese production is running at or near full in the Northeast, and it is fully active in the Midwest and West. Northeastern cheese producers are reporting strong demand, typical of this time of year.

Midwestern contacts say sales are better than expected this far ahead of the busy Super Bowl season. Domestic demand is solid in the West. Following heavy holiday production in the Northeast and Midwest, cheese stocks have increased. Western contacts report supplies of fresh cheese blocks are tighter, but still in good supply. In CME Group trading on Friday, barrels closed at $1.5750, down $.0250 from last Friday. Blocks closed at $1.6700, up $.0100 from last Friday.

FULL STORY

US: Milk in good supply for cheesemakingUSDA, Israel Weber, January 6, 2017

After the past New Year holiday weekend, national butter production remains active as heavy cream volumes continue clearing into churns. With most schools reopening after the winter break, cream is becoming more available for butter churning. However, in some plants there is limited room to accommodate extra cream loads at this moment.

Meanwhile, some Class II processors are starting to pull more cream out of the churns as they restart production after being closed for the holidays. Processors are mainly doing bulk butter and stocks are building into cold storage. Nevertheless,

a few manufacturers are making print butter in advance of the football playoffs and Super Bowl. Demands from retailers and food service vary across the country. The CME Group monthly average price for Grade AA butter during December was $2.1763, compared to $2.3318 a year ago. On Friday at the CME Group, Grade AA butter closed at $2.2200, down $.0475 from last Friday.

FULL STORY

US: Butter remains active post-holidaysUSDA, Angel Teran, January 6, 2017

Butter prices received for 25kg and 68lb boxes meeting United States Department of Agriculture (USDA) Grade AA standards averaged $2.16/lb for the week ending December 31, 2016. The United States (US) price per pound increased 4.8c from the previous week.

Cheddar cheese prices received for US 40lb blocks averaged $1.77/lb, down 1.9c from the previous week. The price for US 500lb barrels adjusted to 38% moisture averaged $1.68/lb, decreasing 2.3c from the previous week.

Dry whey prices received for bag, tote, and tanker sales meeting USDA Extra Grade standards averaged 41.4c/lb, up 0.7c from the previous week.

Nonfat dry milk prices received for bag, tote, and tanker sales meeting USDA Extra Grade or United States Public Health Service Grade A standards averaged 99.3c/lb, up 2.3c from the previous week.

FULL REPORT

US: National dairy products sales reportUSDA, January 6, 2017

The Class III milk price in December was 53 cents a hundredweight higher than in November, while the Class IV price was up $1.29. Following the pattern of recent months, Class III continues to be well ahead of Class IV.

Since peaking in early November, cheese prices have been falling, dropping 28 cents a pound during that period.

The cheese market peaked in mid-December and then dropped about 10 cents a pound. Of course, the holiday entertaining season is now over, so cheese demand in the next few months will be lacklustre.

FULL STORY

US: Class IIII, IV Milk Prices Up in DecemberLancaster Farming, Jim Dunn, December 20, 2016

Back to top 20 January 9, 2017

EXPORTS AND TRADE

Whole milk powder (WMP) futures on the NZX Dairy Derivatives market lifted a little on Friday.

Contracts between February and October lifted US$10-US$75/tonne. The February contract is just US$20/t above the January contract. The January contract settled at US$3230/t while the February contract settled at US$3250/t. WMP is

priced at US$3450/t by September and stays at this level for October as well.

Skim milk powder futures prices for the March, April and May contracts lifted US$5/t, US$10/t and US$15/t respectively.

FULL STORY

NZ: Small lifts to WMP futuresAgriHQ Pulse, Amy Van Ossenbruggen, January 9, 2017

Western European overview: EU milk production January-October this year is 1.1% above the same period of 2015 according to Eucolait. However, each month June-October has been below volumes for each of those months of 2015. For this October, among the larger EU milk producing nations, only the Netherlands and Italy have positive milk production compared to October last year. The Netherlands is up 2.0% and Italy is up 1.1%. The following countries reported declines as shown: Denmark, -5.1%; Germany, -3.7%; France, -7.7%; Ireland, -4.3%; United Kingdom, -6.0%. Some observers note that with rising milk prices in many EU countries, the negative trend may well turn around in coming months. A significant factor in those countries with lower production has been lower cow numbers. This has occurred either by producers reducing herd size, or in some cases, ceasing dairy production. When higher prices are perceived to have staying power, herd expansions are expected.

Eastern European overview: Milk production during October this year compared with October last year, is 0.4% lower in Poland, 1.1% lower in Romania, and 0.4% lower in Hungary, according to Eucolait. In Russia, October 2016 imports of a number of dairy products are lower than October 2015. Skim milk powder is down 18.9% and whey powder is down 39.2%. However butter imports are up 8.4% and whole milk powder imports are up 34.3%.

Australian overview: Most dairy producers are not purchasing any significant amounts of feed at this time. Good pasture conditions throughout much of the country have reduced the need to purchase feed. This might not change until late summer when pastures begin to decline. In Northern Australia, the quality of hay is improving following recent weather damage. Hot and dry weather has helped. Yields have been good, boosting production totals. Demand for hay in coastal areas is the exception to most of the country. Coastal areas have been unusually dry, adversely affecting pastures. Overall,

hay purchasing tends to be hand-to-mouth. Hay interest in the South is very weak. A buyers’ market exists and is expected to continue to exist.

New Zealand overview: November milk production and milk solids lagged the levels one year ago. November 2016 milk production was 2.85 million tonnes, down from 3.04m tonnes in October. During November 2015, milk production was 2.98m tonnes. November milksolids, 234.77m kg, are down from 247.43m kg in October. During November 2015, milksolids were 248.03m kg. The lower milk production was not surprising to many NZ dairy observers. Rainy weather during November, especially in the South island, was expected to impact milk production.

Global Dairy Trade: At the December 20 GDT event #178, average prices ranged from 2.3% lower to 3.3% higher than the previous event across categories. The all contracts price averages (US$/t) and percent changes from the previous averages are: anhydrous milk fat, $5367 - 2.3%; butter, $4290 +0.5%; buttermilk powder, $2874 +3.1%; cheddar cheese, $3,826 +1.9%; lactose, $857 -1.6%; rennet casein, $6473 +3.3%; skim milk powder, $2621 0.0%; whole milk powder, $3568 -0.8%. The rather tepid GDT outcome is not expected to have much impact on farmgate milk prices in NZ, in the view of some observers. Results are still considered adequately strong to support projected milksolids pricing of a larger milk processor at NZ$6/kg MS. This would generate better returns to dairy producers than last season and would help build producer confidence in their ability to work through debt recently acquired to make it through a period of lower returns. Even so, increasing numbers of dairy producers are believed to feel they are experiencing undue pressure from lenders as to their mortgages.

FULL STORY

Global Market OverviewUSDA, December 23, 2016

Back to top 21 January 9, 2017

EXPORTS AND TRADE

Western European overview: Some Western European milk supplies are showing seasonal increases according to ZMB rapid reporting. Information available for Germany shows mid-December 2016 milk volumes were believed to be up 1.2% from the previous week. However, in many parts of Western Europe milk volumes were below the comparable period of 2015. In France, volumes as of late 2016 were 6.8% below previous year volumes. On Thursday, Eucolait reported provisional information subject to final confirmation, that all bids for the second tender of SMP sales held as intervention stocks were rejected. The highest bid was reported to be €196.10/100 kg. As of January 4, the exchange rate per Euro was $1.0439.

Eastern European overview: Milk production in Poland for November 2016 was 1.1% above September according to ZMB. Milk production January-November 2016 led the same period of 2015 by 2.3%.

Australian overview: Since 2011, a number of supermarkets in Australia have offered $1/litre packaged milk as discount store brands. Initially sales of this milk increased, based on pricing typically being the lowest priced milk in retail coolers. A recent agreement by an independent grocer group to directly contract with a co-operative for milk, sold and marketed as supporting the local dairy industry, is the latest in efforts to market retail milk based on higher butterfat coming from known sources. This milk sells for $2.29 for two litres and has cut into sales of lowest price store brand milk from unrevealed sources. Under the most recent joint venture, the retail grocer

group returns 95% of the sale price to the dairy co-operative. Sales data indicates Australian consumers will spend slightly more to buy premium branded milk from known farms as part of a conscious effort to better reward producers for quality milk, than they previously spent for lower butterfat milk from unrevealed farm sources.

New Zealand overview: China has continued to source the largest portion of cheese, butter, whole milk powder and skim milk powder imports from New Zealand for the period January-November, 2016. The percentage of total Chinese imports from NZ for the period and percentage volume change January-November 2016 compared to 2015 are: cheese, 53.5%, 30.9%; butter, 84.8%, 23.5%; whole milk powder, 94.7%, 17.3%; skim milk powder, 61.1%, -6.3%.

Global Dairy Trade: At the January 3, 2017 GDT event #179, average prices ranged from 7.7% lower to 4.5% higher than the previous event across categories. The all contracts price averages (US$/t) and percent changes from the previous averages are: anhydrous milk fat, $5352 -0.6%; butter, $4308 +0.5%; buttermilk powder, $2670 +4.5%; cheddar cheese, $3894 +1.4%; lactose, $836 -2.9%; rennet casein, $6234 -2.7%; skim milk powder, $2660 +2.3%; and whole milk powder, $3294 -7.7%. The negative GDT outcomes are attributed to the timing, being early in a short holiday week, resulting in fewer buyers participating, which resulted in lower demand.

FULL REPORT

Global market overviewUSDA, January 6, 2017

Back to top 22 January 9, 2017

MANUFACTURING R&D

NZ: Milk production still constrained in NovemberAgriHQ Pulse, Steph Holloway, December 20, 2016

The volume of milk collected in New Zealand during November was well down on the previous season as dairy farms continue to suffer from poor pasture quality, even though pasture conditions have picked up from earlier months.

The Dairy Companies Association of NZ has reported that just 234.7 million kg milksolids (MS) were collected in November, 5.3% less than a year earlier.

Milk production during November picked up slightly compared to October when intakes were down 6.1%. It should be remembered that November 2015 was also a month where farmers were struggling for good pasture growth.

Wet weather persisted in November. For Wellington it was the wettest November on record and the third wettest for Dunedin. However, some regions, Gisborne and Hawke’s Bay included, received less rain than normal.

FULL STORY

Fonterra’s Australian milk production in October was down 11% from a year earlier because of unfavourable pasture conditions, the dairy giant says.

Volumes were affected in all large producing states, including Victoria, New South Wales and Tasmania, as farmers experienced a wet spring, Fonterra said in its latest global dairy update.

Production in the 12 months to October was down 7% from the same period a year earlier, it said.

New Zealand and Europe also experienced lower milk production, but United States production continued to grow.

FULL STORY

AUS: Fonterra’s Australian milk production slipsThe Australian, December 21, 2016

Milk production in the United States during November totalled 17.1 billion pounds, up 2.4% from November 2015.

California continues to have the highest total production with about 3.2b pounds. Kansas and Texas had the greatest increase in year-to-year output as those states each produced more than 11% more milk than the previous November, at 280

million and 919m pounds respectively.Production per cow in the United States averaged 1829lb for

November, 39lb above November 2015.

FULL STORY

US: US November milk production up 2.4%Wisconsin Ag, December 21, 2016

The voluntary milk reduction scheme, introduced by the European Commission, appears to be working as the volume of milk produced across Europe has declined.

The latest statistics from the EU Milk Market Observatory show the volume of milk collected across the EU decreased by 3.6% in October 2016 compared to October 2015.

This coincides with the first month of the voluntary three-month programme, which pays farmers 14c for every litre of

milk reduced on the corresponding time in 2015.The first tranche of the scheme will run from October to

December of this year. The Commission said 52,000 dairy farmers across Europe applied to take part in tranche one of the milk reduction supply measure.

FULL STORY

EU: Milk reduction scheme appears to be working as collections fallAgriLand, December 22, 2016

Back to top 23 January 9, 2017

MANUFACTURING R&D

Early figures suggest Irish dairy farmers increased milk production by 3% to 5% in 2016, on top of the 13% increase in 2015.

This means Irish production is heading for more than 6.6 billion litres of milk. The 2016 increase would have increased milk output by more than €60 million at a price of 25c/litre.

Our early estimates of milk produced, gathered from a survey

of processors this week, suggest over 150m litres more milk was produced in 2016.

This increase was delivered despite significant reductions in milk price.

FULL STORY

IRELAND: 2016 milk supply hits 6.6b litresIrish Farmers Journal, Jack Kennedy, January 5, 2017

The latest cattle census from Germany shows an overall reduction in the country’s dairy herd. As of November 2016, Germany’s dairy cow population was down almost 67,000 head compared to November 2015.

Breeding heifer numbers aged 1-2 years, and 2 years and older, are also lower than last year. Although the numbers in the two age groups cannot be split out between beef and

dairy, given the German herd is dominated by dairy cows, the reduction in breeding animal numbers is likely because of fewer dairy replacements being bred. Dairy cow holdings have also declined in the past year to 69,000, a drop of almost 6%.

FULL STORY

GERMANY: German dairy herd consolidatesAHDB Dairy, January 6, 2017

United Kingdom daily milk deliveries are continuing a downward trend compared to last year, averaging 36.2 million litres/day in the two weeks to December 10, down 6.7% on the same period last year.

Compared with the three-year average, production was 3.4% lower. A similar pattern was seen in Great Britain deliveries, with the daily average falling 7.4% to 30.6m litres/day – 4.1%

below the three-year average.On a world scale, the latest Global Dairy Trade auction saw

the first fall in value since the beginning of October, down 0.5% compared with the previous event, averaging $3656/tonne (£2961).

FULL STORY

UK: UK milk production down 6.7% on the yearfwi.co.uk, Melanie Jenkins, December 23, 2016

The current Defra UK milk production figures are causing some confusion in the industry. After queries from AHDB, Defra investigated their September and October figures and acknowledged the values were too high. Revised figures for both months will be published by Defra on January 5.

AHDB undertakes a daily deliveries survey each week, covering approximately 66% of UK milk deliveries. This survey gives us an indication of what the monthly milk production figures are likely to be. Those daily deliveries suggest production

in September was about 1075 million litres and October about 1111m litres.

While the AHDB figure is only an estimate based on our daily deliveries survey, we believe it is the closest estimate available and Defra has confirmed to AHDB their updated figures will be in line with these estimates.

FULL STORY

UK: Milk production confusionAHDB Dairy, December 21, 2016

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MANUFACTURING R&D

For 11 months of this year the volume of milk production in agricultural organisations across Russia increased by 2.1% compared to the same period last year and amounted to 13.77 million tonnes, the Department of Animal Husbandry and Breeding says.

The director of the department, Kharon Amerkhanov, noted the priority of development of the dairy sub-sector of animal

husbandry in the state agricultural policy, stressing the positive dynamics of milk production in agricultural enterprises was the result of the adopted package of measures at the federal and regional levels.

FULL STORY

RUSSIA: Milk production in Russia increased by 2.1%Agro2b.ru, December 23, 2016

Today the operation results of the agro-industrial sector were summed up by the Ministry of Agriculture and Food.

Minister Leonid Zayats said at the end of December milk production would increase by more than 120,000 tonnes to 6.8 million, the highest volume Belarus has produced. Belarus satisfies the needs of the domestic market and good results are observed in the supply of Belarusian foodstuffs abroad, Zayats said.

“This year we have supplied our products to new promising markets, such as Africa, Singapore, the Philippines, Bulgaria, Serbia, Israel, and some parts of the United States. Thirty-four enterprises have been certified for the supply of food products to China,” he said.

FULL STORY

BELARUS: 2016 becomes record year in Belarus in terms of milk productionBeltelerRadioCompany, December 30, 2016

United States butter stocks reduced considerably in November and above-average draw-downs during the previous two months left butter stocks looking less burdensome, Rice Dairy analyst Matt Gould says.

The latest US Department of Agriculture Cold Storage report showed during November butter stocks in refrigerated warehouses fell 29% from that stored at the end of October. A total of 161 million pounds (72,972 tonnes) was in storage at the end of November. Butter volumes in storage were more

than 200m pounds in October (103,491t).The November volume still sat 21% higher than a year ago

and 44m pounds (19,958t) higher than the five-year average, Gould said, but higher-than-average draw-downs for several months put butter stocks in a more price-supportive position.

FULL STORYFULL REPORT

US: US butter stocks contract 29% ahead of holidaysAgriHQ Pulse, Steph Holloway, January 5, 2017

The USDA’s Dairy Products report for November showed total cheese output (excluding cottage cheese) was 1.01 billion pounds, 2.7% above November 2015 but 2.6% below October 2016.

Italian type cheese production totalled 436 million pounds, 2.6% above November 2015 but 2.3% below October 2016.

American type cheese production totalled 395m pounds, 3.9% above November 2015 but 1.0% below October 2016.

Butter production was 144m pounds, 5.7% below November 2015 but 1.5% above October 2016.

FULL REPORT

US: Butter production below year agoUSDA, January 5, 2017

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MANUFACTURING R&D

Milk supply from dairy export regions has fallen sharply, by 2.6 million tonnes in the second half of 2016, with milk volumes from Oceania and Europe severely challenged. In addition, domestic demand in the United States and Europe continued to strengthen, negating the need for further stock growth and reducing volumes available for export by 4.5m tonnes in LME terms. As a result, global dairy prices have rocketed upwards, increasing by over 45% in the second half of 2016.

Most of the domestic demand growth is for cheese and butter. Therefore, the spread in prices across the dairy complex stocks will remain wide, with demand for butterfat driving the market and surplus protein, including European stocks, weighing on the market, according to the Rabobank Global Dairy Quarterly Q4 2016.

FULL RELEASE

Rabobank global dairy quarterly Q4 2016: Supply ‘crunch’ bitesRabobank, December 22, 2016

New Zealand milk production – November 2016 YTDDairy Companies Association of New Zealand, December 21, 2016

‘000 kg MS 2015-16 2016-17 % change 2015-16 2015-16 % change

June 13,104 13,013 -0.69% 13,104 13,013 -0.7%

July 19,892 19,923 0.16% 32,996 32,936 -0.2%

August 116,682 113,130 -3.04% 149,678 146,066 -2.4%

September 209,494 210,113 0.30% 359,172 356,179 -0.8%

October 263,469 247,431 -6.1% 622,641 603,610 -3.1%

November 248,034 234,770 -5.3% 870,675 838,380 -3.7%

December 232,655 1,103,330

January 208,036 1,311,366

February 171,624 1,482,990

March 162,357 1,645,347

April 134,607 1,779,954

May 82,798 1,862,752

Source: DCANZ

FULL REPORT

Back to top 26 January 9, 2017

MARKETING

NZ: Lewis Road’s legal stoush with Fonterra a hard one to win – trademark expertStuff.co.nz, Tao Lin, December 20, 2016

Lewis Road Creamery has a case against Fonterra, but it is going to be difficult to win, a trademark specialist says.

Last week, the boutique dairy company declared it was taking Fonterra to court over labelling and access to shelf space in supermarkets.

Three legal claims were filed in relation to the Fair Trading Act, Commerce Act and “passing off ”, which is a legal argument for protecting unregistered trademarks.

Fonterra has rejected them all, saying Lewis Road’s claims were not true.Duncan Cotterill lawyer and trademark specialist Dan Winfield said Lewis Road had a case in terms of the

labelling, but it would be difficult to win.The company would need to show a significant portion of consumers would be misled or deceived by Fonterra’s

product into thinking it was Lewis Road’s.

FULL STORY

Lewis Road Creamery will not pursue part of its legal action against Fonterra because it says a deal between the dairy giant and supermarkets does not include premium brands.

Lewis Road Creamery founder Peter Cullinane earlier this month accused Fonterra of negotiating a “greedy” deal with supermarkets, which would limit the ability of smaller dairy brands to get space in the chiller.

At the time a representative for the Countdown supermarket chain said it was not involved in any deal with Fonterra, while

Foodstuffs said agreements were confidential.Cullinane today said lawyers for both sides had found a

resolution and had confirmed the deal excluded premium milk products. That meant smaller competitors such as Lewis Road would be afforded a reasonable amount of chiller space, allowing them to remain competitive with the milk giant, he believed.

FULL STORY

NZ: Lewis Road drops Fonterra legal actionNZ Herald, Francis Cook, December 22, 2016

United States lawmakers and congressmen urged the FDA last week in a letter to re-label plant-based products, because they believe the use of the term “milk” by manufacturers is “misleading to consumers, harmful to the dairy industry, and a violation of milk’s standards of identity”.

The request has drawn support from the dairy industry, including the National Milk Producers Federation.

The letter said milk prices had plunged 40% since 2014, which caused dairy farmers to face “a serious financial crisis”. Meanwhile, there had been tremendous growth in the sale of plant-based products.

FULL STORY

US: FDA requested to relabel plant-based ‘milk’DairyReporter.com, Douglas Yu, December 19, 2016

Back to top 27 January 9, 2017

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CONSUMER

CHINA: Chinese dairy shoppers becoming less satisfied with their milkFoodNavigator-asia.com, RJ Whitehead, December 19, 2016

Customer satisfaction is on a downward spiral among Chinese dairy consumers, according to the latest national research report on shoppers’ attitudes to liquid milk, which also highlighted how the public are demanding higher-quality products.

The results of the survey by the China Association for Quality (CAQ), a standards monitor, can be divided into the key areas of satisfaction, format and distribution.

The first concerned satisfaction, brand image and perceived quality – each of which, the report found, had decreased over the last year. Though this downwards trend in opinions was only marginal, it should still be seen as a clear warning for milk manufacturers and suppliers, the authors wrote.

According to Chinese market analyst CCM, milk consumers are price sensitive, though at the same time they attach increasing value to quality and provenance, and respond little to promotional activity. Each time prices are raised, satisfaction levels go down accordingly, CCM found.

FULL STORY

Prepare to pay more for milk and cream in the New Year as dairy giant Fonterra increases its prices.

Customers have received letters from milk suppliers saying Fonterra had advised them “due to global demand, pricing across the range of fresh milk, flavoured milk and UHT products will increase by 9.1 cents a litre and fresh cream by 41.4 cents a litre, effective January 2”.

They sent the letters on to the media, outlining their concerns.“Massive profits yet Fonterra still increase milk prices to

everyday New Zealanders – no wonder fizzy drinks are the norm for our kids as the price never increases,” one customer, who did not want to be named, said.

FULL STORY

NZ: Fonterra milk prices on the riseStuff.co.nz, Ellen Read, December 20, 2016

Indians love milk and dairy products, and now there is proof.According to Bloomberg data, India is set to overtake Europe

as the world’s largest consumer of milk and dairy products.Indians consumed 26.07% of the global milk and dairy

products produced in 2016. That is just 0.17% lower than the total consumption in Europe and much higher than in America, which is third on the list.

And it’s not just consumption. India is also expected to overtake the European Union as the world’s largest milk and dairy producer by 2020, according to international research firm IMARC.

FULL STORY

INDIA: Indians consume more dairy than ever beforeBloomberg, Sagar Salvi, December 28, 2016