Such reports suggest inconsistencies in farmgate prices not only from country to country but within countries. Indeed, although average farmgate milk prices fell in November 2015, some co-ops (including major players like the Netherlands’ FrieslandCampina and Germany’s DMK) actually raised payments. (FrieslandCampina has since implemented a bonus system to encourage members not to increase milk production through mid-February (see Global Dairy eBrief, 1/7/16)).
This week, Ireland’s Glanbia Co-operative Society announced a “member support package” for 2016 that will see the company hand out €35.6 million (about US$38.7 million) in additional payments to its farmers. The scheme follows a similar €30-million support package parceled out in 2015. Fellow Irish dairy processor Ornua announced “additional cash bonus” payments of €15 million to its suppliers for 2016. Earlier this month, the Irish Farmers Association called for co-ops to hold milk prices steady even if co-ops needed to support prices as they did in 2015.
New Zealand’s Fonterra Co-operative Group and Westland Milk Products pointed to EU overproduction as a major reason why global prices remained in the doldrums (see “Fonterra, Westland lower payout forecast” below). Westland said EU companies were “overpaying” for milk. (USDEC staff; European Commission; International Business Times, 1/28/16; Agrimoney.com, 1/28/16; Agriland, 1/27/16, 1/19/16, 1/13/16, 1/9/16; Shropshire Star, 1/25/16; TheDairySite, 1/18/16; Dairy Markets, 1/11/16)
China imports shift to fluid milk, infant formula
In December, China imported 62,580 tons of fluid milk and cream, and 24,968 tons of infant formula, both new highs, and both more than double year-ago levels. Imports of butterfat (+115 percent) and cheese (+43 percent) also were significantly above the prior year. Meanwhile, WMP imports continue to lag. China bought just 19,298 tons of WMP last month, down 21 percent, and the smallest December figure since 2008. SMP imports were 15,530 tons, up 5 percent. On a milk-equivalent basis, China imports in December were up 45 percent from the year before. For the year, milk-equivalent imports were down 20 percent, a decline of 2.4 million tons of milk. (USDEC staff; Global Trade Atlas)
ALIC announces butter, SMP tenders
Japan’s Agriculture and Livestock Industries Corp. (ALIC) will hold tenders in February for 7,000 tons of butter and 2,000 tons of SMP. Tender volumes are based on J Milk domestic butter and milk production projections for fiscal 2016 (-0.7 percent and -0.6 percent, respectively) and fall under current access allocations. J Milk will reassess conditions in May to determine whether additional imports are necessary. ALIC has not yet announced a specific date for the February events. (USDEC Japan office)
USDEC touts dairy’s “clean label” potential
A new USDEC technical report offers food and beverage makers information on how to use dairy ingredients to create “clean label” products. Although “clean label” has no official definition, a growing number of U.S. consumers believe that shorter, simpler, easier-to-understand ingredient labels support healthier, more nutritious diets. Dairy ingredients—minimally processed, nutritious, functional—align perfectly with that trend.
The 12-page report, Dairy Solutions for Clean-Label Applications, offers short explanations of dairy’s “clean-label” qualifications as well as examples of how dairy ingredients can be used to seamlessly replace less label-friendly components like partially hydrogenated fats and chemical emulsifiers in bakery products, beverages, dairy products and desserts, prepared dinners, sauces and soups. The report is free for download through the Resources & Insights section of ThinkUSADairy.org.
11 data points on the economic impact of U.S. dairy exports
The U.S. Dairy Exporter Blog published a post this week summarizing a USDEC/NMPF report about the impact of free trade agreements. The post lists 11 data points quantifying the economic influence U.S. dairy exports have had, not only on the U.S. dairy industry, but the U.S. economy. Click here to download the full report.
MARKET CONDITIONS
Fonterra, Westland lower payout forecast; Westland talks China potential
New Zealand’s Westland Milk Products and Fonterra Co-operative Group followed the lead of Open Country Dairy (see Global Dairy eBrief, 1/21/16) and reduced their 2015/16 payout estimates. Westland dropped its forecast payout to NZ$4.15-$4.45/kgMS (down from NZ$4.90-$5.30) while Fonterra lowered its farmgate milk price to NZ$4.15/kgMS (from NZ$4.60). Converting to U.S. measures, NZ$4.15-$4.45 equates to US$8.20-$8.80/cwt.
The move will slash an average of NZ$67,000 per farm in income (based on production of 150,000kg/MS). DairyNZ estimated the recent payout downgrades meant about 85 percent of New Zealand dairy farmers would post a loss for the 2015/16 season.
Fonterra cited challenging global economic conditions and the continued global imbalance between supply and demand. Both co-ops said they believed dairy commodity prices would move higher this year and expressed faith in long-term market fundamentals citing an eventual return of stronger Chinese purchasing. ASB echoed the sentiment.
Westland went so far as to issue a press release outlining its faith in Chinese market growth. The company downplayed China’s recent stock market issues and slowing rate of GDP growth, focusing instead on the nation’s expanding middle class and rising demand for premium dairy products like infant formula and UHT milk and cream. While dairy commodity sales to China are down, premium products continue to enjoy high double-digit growth.
Westland says that despite farm investments and productivity improvements, China will “never be self-sufficient” in dairy and will in fact “become increasingly less self-sufficient” over time. To read the whole press release, click here. (Company reports; BusinessDesk, 1/28/16; New Zealand Herald, 1/24/16; Agriland, 1/22/16)
Late Venezuela payments strain Uruguayan dairy exporters
Uruguayan dairy exporters are more aggressively courting business in Algeria, Brazil, Mexico and Russia after Venezuela defaulted on a dairy import deal inked last year between the governments of both nations (see Global Dairy eBrief, 8/27/16). Uruguayan exporters shipped 44,000 tons of milk powder and 12,000 tons of cheese to Venezuela in the last quarter of 2015 but were paid only a fraction of the bill. Venezuela is in the midst of an economic crisis marked by steep inflation, reduced income due to plummeting oil prices and recession.
The agreement was supposed to triple in value this year and would have provided much-needed support to Uruguayan farmers and processors who had been struggling with poor weather and low prices. Local cheese processors reportedly had to sell product earmarked for Venezuela to Mexico at much reduced prices. (Dairy Markets, 1/21/16)
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:
- In December, China imports of WMP were down 21 percent from the prior year (see story at top).
- South Korea cheese imports were up 31 percent in December, compared with the year before. For the year, imports were up 15 percent.
- In the first half of 2015, Venezuela WMP imports were just half of what they were the year before.
- Indicative price and currency graphs are updated weekly as well.
To browse the full Market Data section of usdec.org, click here.
COMPANY NEWS
Ryan hired as new Darigold CEO
Seattle-based Darigold hired Stan Ryan as its new CEO effective February 22. Ryan served for 25 years in executive positions at Cargill, including platform leader of Cargill’s Agricultural Supply Chain in Shanghai, where he oversaw agricultural commodities origination, trading and processing. Most recently he was interim CEO and board director for New York-based Eagle Bulk Shipping. (Company reports)
Nestlé makes ecommerce deal with Alibaba
Nestlé signed a partnership deal with Chinese Internet giant Alibaba, saying that an online presence is an essential part of building its brands in China. The deal covers five ecommerce sites—chaoshi.tmall.com, tmall.com, tmall.hk, cun.taobao.com and ju.taobao.com—from which Nestlé plans to build key brands, grow online sales, rollout new products, and better reach and develop rural markets. In addition to direct sales online, the company said offline purchases are increasingly influenced by what consumers see online, “so brand building has gone beyond having good television advertising and nice packaging.” (Company reports; FoodNavigator-Asia.com, 1/20/16)
Mergers, acquisitions and joint ventures
Lactalis agreed to purchase Romania’s largest dairy processor Albalact . . . China’s Yashili Group sold infant formula manufacturer Scient International Group to fellow Chinese dairy processor Ausnutria Dairy . . . Singapore-based Schulze Global Investment purchased a 45 percent stake in Ethiopian dairy processor MB and plans to triple capacity at the company’s two manufacturing plants. (USDEC China office; DairyReporter.com, 1/28/16; Addis Fortune, 1/24/16)
Company news briefs
After rumors circulated late last year, Coca-Cola confirmed it will launch a dairy-based beverage line in India under the Vio label. Schreiber Dynamix Dairies will manufacture the product, which will debut across the country starting in February . . . Chinese nutritional supplement manufacturer By-Health reportedly reached a framework agreement with Fonterra whereby the Kiwi dairy processor will help develop protein-fortified products and other functional foods for sale in China . . . Japan’s Ezaki Glico rolled out four ice cream brands—Palitte, Giant Cone, Panapp and Seventeen—in Thailand. Its Thai subsidiary Glico Frozen (Thailand) will market the products, which are being manufactured by a local Thai processor under contract . . . The UK created a new export promotion agency called the Great British Food Unit and tasked it with the goal of doubling the export value of domestically produced food and drinks. (USDEC Japan office; DairyReporter.com, 1/27/16; Press Trust of India, 1/25/16; TheDairySite, 1/22/16)
From the U.S. Dairy Exporter Blog
