Upcoming Report: Do long-term assumptions about global dairy supply and demand still hold true?
In 2009, the Innovation Center for U.S. Dairy released its “Globalization Report,” an influential strategic analysis of the global dairy landscape by the management consulting firm, Bain & Co. Among its insights, the report concluded that global trade demand for dairy would exceed the ability of traditional suppliers to meet the need. More importantly, it concluded that the U.S. dairy industry was well positioned during the early years of the decade to meet a larger-than-historical portion of any supply/demand gap.
As part of both its ongoing strategic planning process and assessments of the duration of the current soft dairy trade cycle, USDEC staff is revisiting the report’s long-range forecasts and demand drivers. Specifically, USDEC analysts will determine if those long-term trends still hold true. Stay tuned for its release later this month.
Weather events suggest El Niño impact strengthening
A rash of extreme weather events over the past couple weeks may be a sign of heightened El Niño fallout, meteorologists say. The U.S. has been one of the hardest hit regions, with flooding in the Midwest and California and the Goliath blizzard in the Southwest (responsible for the death of 30,000-40,000 dairy cows in New Mexico and Texas). Forecasters see progressively stronger storms rolling in over the next two weeks, with Northern California projected to receive as much as 15 inches of rain in that time period.
Four years of drought have left California in dire need of replenished water supplies and contributed to a 545,000-ton decline in milk production through the first 10 months of the year. But the National Oceanic and Atmospheric Administration said that even the wettest year on record would not erase the state’s water deficit built up over the current drought period.
Europe has been affected as well. Farmers in Ireland and the UK estimate more than $30 million in damages after severe storms last week caused flooding, destroyed property and drowned livestock. Ice in the Netherlands forced FrieslandCampina to forgo milk collection from 450 farmers for a short period, a scale of milk dumping not seen by the co-op since 1979.
On the other hand, while large areas of Australia and parts of New Zealand remain in drought, select dairying regions in both countries saw sustained rains that refilled irrigation systems and promised to bolster pasture growth. Neither country is out of drought danger, but the wet weather delivered relief to farmers on New Zealand’s North Island areas of Manawatu and Rangitikei and Australia’s Bega Valley. (Company reports; Los Angeles Times, 1/6/16; NLTimes, 1/6/16; Irish Times, 1/6/16; NZFarmer.co.nz, 1/5/16; Dairy Markets, 1/5/16; Modesto Bee, 1/5/16; Agri-View, 1/5/16; Dairy Herd Management, 12/31/16)
USDEC releases South Korean cheese report
South Korea is the No. 2 U.S. market for cheese exports, but competition is tightening. The latest challenge to U.S. suppliers arrived last month in the form of the newly implemented New Zealand-Korea FTA (see Global Dairy eBrief, 12/10/15).
A new USDEC research report provides an updated analysis of the Korean cheese market, outlining ongoing opportunities and recommendations for U.S. cheese suppliers to capitalize on the nation’s growing appetite for cheese. Among other information, the report:
- Examines ongoing shifts and opportunities, especially in light of the implementation of FTAs with Korea’s main cheese trading partners.
- Presents an overview of the local dairy industry and how its development will impact imports.
- Analyzes Korean cheese imports.
- Identifies steps for the U.S. dairy industry to preserve market share and capitalize on new opportunities.
The report is free to USDEC members. Go to the Research Reports section of the USDEC website to get a copy delivered right to your inbox.
U.S. Dairy Industry Spore Seminar set for February 16
USDEC and National Dairy Council are holding the third U.S. Dairy Industry Spore Seminar on February 16 in Pismo Beach, Calif., just prior to Cal Poly’s 18th Annual Dairy Ingredients Symposium. The daylong seminar will feature the latest information and research findings on spores and overall milk powder quality. Presentations will address the impact of on-farm and in-plant practices on spore levels, new technologies, cleaning protocols, milk powder flavor and functionality, and other means to improve milk powder quality. A reception follows the event.
Registration is free to USDEC members. Register online here or contact Katie Radloff at kradloff@usdec.org. For more information on Cal Poly’s Dairy Ingredients Symposium, click here.
MARKET CONDITIONS
FrieslandCampina to pay farmers to produce less milk
Dutch dairy co-op FrieslandCampina implemented a new plan to pay its farmers what amounts to a 5 percent bonus if they maintain or reduce milk production from January 1-February 11, 2016. The move signals a long-awaited more aggressive approach to the problem of EU overproduction. Volume for the stated period will be measured against average daily production from December 12-27, 2015. Producing less milk is in the co-op’s collective best interest, FrieslandCampina said. (Agriland, 1/6/16; Dutch News, 12/29/15)
GDT declines 1.6 percent
The GlobalDairyTrade (GDT) Index declined 1.6 percent to an average price of US$2,458/ton at the first auction of 2016 on January 5. Milk powder markets remain oversupplied and recent weather reports out of New Zealand and Australia have tempered expectations for El Niño-related production declines.
The results put further into jeopardy Fonterra Co-operative Group’s estimated NZ$4.60/kgMS farmgate milk price for the 2015/16 season. New Zealand’s Federated Farmers chairman Andrew Hoggard said WMP prices on the GDT would need to rise 8-10 percent at every auction from now to the end of the season for to co-op to make that price—which is below break even for most New Zealand farmers. Failure to do so would likely result in a further pay cut to farmers and greater financial strain.
GDT average winning prices changed as follows: WMP fell 4.4 percent to US$2,210/ton; SMP fell 0.8 percent to US$1,890/ton; AMF fell 4.4 percent to US$3,644/ton; butter rose 6.7 percent to US$3,314/ton; and cheddar increased 3.5 percent to US$2,964/ton. Complete auction results can be viewed here. (USDEC staff; GDT; NZFarmer.co.nz, 1/6/16)
Data updates on USDEC.org
Have you checked out the interactive charts of market and trade data on the USDEC website? Key metrics like milk production, exports and imports and prices are updated regularly. This week we learned:
- We’ve revised EU-28 milk production numbers back to 2008 to reflect on-going discrepancies with EuroStat numbers for Italy. We’ve replaced EuroStat figures with those from AGEA, Italy’s Agency for Agricultural Payments. With this adjustment, we report EU-28 milk deliveries in October up 4.0 percent vs. the prior year.
- Japan imported 21,258 tons of cheese in November, up fractionally from the year before.
- The Philippines imported 10,135 tons of SMP in September, up 52 percent.
- In November, Hong Kong imported 6,814 tons of WMP, down 17 percent.
- In November, Thailand imported 6,615 tons of whey products, up 81 percent.
- Indicative commodity prices and currency graphs are updated each week as well.
To browse the full Market Data section of usdec.org, click here.
South Korean pizza sector evolves
South Korea’s foodservice pizza sector has seen a shift in growth over the past few years, with a major push by lower-priced “Tier 2” chains. The nation’s three leading “premium” pizza restaurants—Mister Pizza, Domino’s and Pizza Hut—added a combined total of 99 new stores from 2012-2014. By contrast, five large Tier 2 chains—Pizza School, 59 Pizza, Pizza Maru, Bbongdderak Pizza and Pizza Alvolo—added 422 units.
In total number, those five Tier 2 restaurants boasted 2,433 outlets combined at the end of 2014. The three premium brands had 1,188. South Korea’s struggling economy and sharp improvements in Tier 2 pizza quality are two of the major reasons behind the shift. Mediocre economic prospects in 2016 suggest the trend will continue. (USDEC South Korea office)
COMPANY NEWS
Mergers, acquisitions and joint ventures
Milk producer Australian Dairy Farms paid A$11 million (about US$8 million) for Victoria, Australia-based Camperdown Dairy Co., including a Camperdown fluid facility certified for export to China. (AAP, 12/29/15)
Company news briefs
China’s Wuxi Modern Agricultural Research Institute rolled out a new milk powder line under the brand name Carecoming. The product is manufactured by New Zealand’s New Image Group . . . Danone is reportedly closing dairy manufacturing plants in Cheboksary and Tomsk, Russia. Production will be transferred to other plants in the region. Danone attributed the closures to outdated equipment, low profitability and declining sales . . . Ireland’s Liffey Mills is building a €3 million dairy feed facility in Roscrea, County Tipperary, to capitalize on post-quota efforts to boost per-cow milk production. (USDEC China office; Irish Independent, 1/6/16; TASS, 1/26/15)
From the U.S. Dairy Exporter Blog
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