Dairy Market Report

End February/Early March 2010

 Latest Developments - EU (1)
• EU market prices stabilising above intervention (25% above for
butter, 10 to 12% above for SMP) – expected to do so for a few
weeks at least (slight lift in feed SMP in last 2 wks)
• Market tightening
• Intervention: new season opened as of 1st March, but no
intervention purchases expected for the short term
• Cold weather + poor prices limiting supplies – France 1 to 2%
below a year ago
• SMP export competitive against US product, and strong exports
since October
• Butter uncompetitive still, but gap has narrowed
• US$ strength against weak Euro has helped EU exports
• Cheese output more profitable so could increase again, limiting
SMP/butter supplies
 Latest Developments (2)
Concerns:
• Stock releases in EU and US causing nervosity
– Concerns over Deprived Persons Scheme and
intervention stock handling
• UDF milk auction in NI down 0.73ppl to 23.32
ppl (equals to 26.62cpl at current exchange rate)
• Unknowns:
– Outcome of Fonterra auction on 2nd March – will
include SMP for first time, in addition to WMP and
AMF.
 Branded butter (bulk) EU prices Belgium

Early Jan 09 to Late Feb 10 Germany

France

3800 Netherlands
3600
Poland
3400
3200
3000
€/tonne

2800
2600

2400
2200
2000
1800
b

b
pt
l
ar

ov

ec
n

n
ay
r

ct
Ju
Fe

Ap

Fe
Ja

Ju

Ja
Au
M

Se

D
M

rly
rl y

rl y

rl y

rl y

rl y

rl y

rl y

rl y
rl y

rl y
rl y

rl y

rly
Ea
Ea

Ea

Ea

Ea

Ea

Ea

Ea

Ea
Ea

Ea
Ea

Ea

Ea
 €/tonne
Ea
rl y

1300
1400
1500
1600
1700
1800
1900
2000
2100
2200
2300
Ja
n
Ea
rl y
Fe
b
Ea
rl y
M
ar
Ea
rl y
Ap
r
Ea
rl y
M
ay
Ea
rl y
Ju
n
Ea
rl y
Ju
l
Ea
rl y
Au
g
Ea
rl y
Se
pt
Ea
rl y
O
ct
Ea
rl y
N
ov
Ea
rl y
D
ec
Ea
rl y
Ja
n
Early Jan 09 to Late Feb 10
SMP feed (spray) EU prices

Ea
rl y
Fe
b
France

Poland
Germany

Netherlands
 €/t
Ea
rly

1600
1800
2000
2200
2400
2600
2800
3000
3200
3400
3600
J
Ea an
rly
Fe
Ea b
rly
M
ar
Ea
rly
Ap
Ea r
rly
M
ay
Ea
rly
Ju
Ea n
rly
Ju
Ea l
rly
Au
Ea g
rly
Se
Ea pt
rly
O
Ea c t
rly
N
Ea ov
rly
D
ec
Ea
WMP EU prices

rly
J
Ea an
rly
Fe
b
Early Jan 09 to Late Feb 2010
France

Poland
Germany

Netherlands
 €/tonne
Ea
rl y

310
360
410
460
510
560
610
660
710
Ja
n
Ea
rl y
Fe
b
Ea
rl y
M
ar
Ea
rl y
Ap
Ea r
rly
M
ay
Ea
rl y
Ju
n
Ea
rl y
Ju
Ea l
rly
Au
Ea g
rly
Se
pt
Ea
rl y
O
ct
Ea
r ly
N
ov
Ea
r ly
D
ec
Ea
rl y
Early Jan 09 to Late Feb 10

Ja
n
Ea
rl y
Fe
b
Whey powder (feed spray) EU prices
France
Germany

Netherlands
World market
 World market developments
• Awaiting March 2nd Fonterra tender: first time to include
SMP
• Constricting supplies
– NZ milk production 6.2% down on previous year for July-Dec period,
though full 12 month expected 4% down
– Oz supplies down 6% in second half of 2009
– Product availability from Oceania will be very limited in coming months
– US supplies expected to fall further
– Cold weather restricting supplies all over EU – will delay Spring peak
• Rising demand
– International tender for 30,000 to 50,000t of SMP + WMP mix currently
being watched (Algeria??): expected to benefit EU traders most of all –
due to short dates for delivery (March-May)
• EU best placed to pick up on export demand over coming
months.
 World prices for New Zealand products
2007 to 2010 todate

5400

4900

4400

3900
US$/t

3400

2900

2400

1900

1400

2007 2008 2009 2010

Week No.

Butter SMP WMP Cheddar

 US$/t

400
1400
2400
3400
4400
5400
1
3
5
7
9
11
13
15
17
19
21
23

Butter
25
27

2007
29
31
33
35
37
39
41
43

SMP
45
47
49
51
1
3
5
7
9
11
13

WMP
15
17
19
21
23
25
27

2008
29
31
33

B'oil
35
37
39

Week No.
41
43
45
47
49
2007 to 2010 todate

51
1
3
5
7
9
11
13
15
Whey Powder 17
19
21
23
25
27
2009

29
31
33
35
World dairy market prices - Western European products

37
39
41
43
45
47
49
51
1
3
5
2010

7
 EU SMP competitive on world
market without refunds – butter not
1st March 2010

EU Price in € World price in US$ NZ v. US v.

EU Refund € $ $/€ x rate Ocean. Europ. US EU EU
SMP 1900 0 1900 2600 1.36857 2750 2675 2794 -150 -194
Butter 2850 0 2850 3900 1.36857 3650 3825 3097 250 803

Exch rate w hole month of Feb 2010

1 tonne = 2205 lbs
 €/tonne

10000
3000

4000

5000

6000

7000

8000

9000
Jan-04

US Casein returns back to 2007 levels

Mar-04
May-04
Jul-04
Sep-04
Nov-04
Jan-05
Mar-05

US casein returns (in €/t)

May-05
Jul-05
Sep-05

Jan 04 to Mar 10
Nov-05
Jan-06 Av casein price
Mar-06 Casein aid
May-06
Jul-06
Sep-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
 Exchange rate make EU product
more competitive
US$ down 8% against
Euro since Nov 09
Current: €1 = $1.368

Stg £ down 4.3% against

Euro since Oct 09
Current: €1 = Stg£ 0.876
 Outlook for Spring?
• Product prices may not dip with seasonal spring
production increase if EU export rise
• This is likely in view of low Australasia and US
availability
• Advantage of weak Euro/strong US$/Stg
• EU cheese prices now compare favourably and
competitively with US and Oz+NZ
• Demand could strengthen
• Commitment on stock holding from new
Commissioner?
Spring 2010 Milk Prices
 Manufacturing Milk Prices—January 2010
c/litre , 3.3% p, 3.6%f, ex. VAT, collec, and cond. bonuses
Co-op Collection Jan change Jan price
Drinagh 0.40 1 25.25
Bandon 0.00 1 25.21
Barryroe 0.28 1 24.93
Lissavaird 0.28 1 24.87
Lakeland 0.39No change 24.48
Arrabawn 0.50No change 24.08
T. of Mon. 0.40No change 24.00
Newmarket 0.00No change 24.00
Wexford 0.00No change 24.00
North Cork 0.00No change 24.00
Dairygold 0.00No change 23.77
Tipperary (See below) No change 23.76
Glanbia 0.00 No change 23.76
Kerry 0.00 No change 22.81
Con Gold (incl in –C) No change 22.39
Conditional bonuses not included above:
Lakeland: Oct-Mar lactose bonus 0.27+ VAT paid > 88% of suppliers incl.
Glanbia: 1.5c/l lactose-related bonus if June production <16%
Con Gold: 0.44c/l 7-milk cap; 0.3c/l <200k SCC; 0.3c/l <30k TBC
West Cork Co-ops: 0.88c/l <200k SCC for Nov to Feb milk
Dairygold: 0.4c/l <200k SCC
Tipperary: Coll free for capacity for 3 days’ milk; 0.1c/l <200k SCC
Milk supplies dipping due to lack of
profitability more than bad weather
Milk supplies falling month on month since last April
Down 3% year on year
11% below quota at end Jan 10

800

700

600

500
2008
m litres

400 2009
2010
300

200

100

0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2c/l price lift needed and justified
on basis of whole year outlook
• Average Jan milk price: 24c/l
• Teagasc estimate for 2010 costs: 23c/l
• To cover costs + pay modest wage: need 28c/l
• 26c/l by March not unreasonable
• 2c/l price increase by March needed to
– Boost confidence
– Reassure bank manager
– Secure milk supplies
Thank you for your attention!