Cheese capacity surges in Europe while online sales grow in the US
The fundamentals of the global dairy market outlook are positive, but Maxum Foods procurement director Dustin Boughton said this may weaken as milk supply grows.
Projections for commodity product values is mixed, as butterfat values have stabilized, while increased cheese capacity in Europe will keep supplies high and may cap values.
Butterfat, whey, SMP and WMP
Skim milk powder (SMP) has improved with less EU and US output and sustained export demand. Boughton said it is new territory, and the category is no longer driven mostly by the EU stock turn. He expects SMP prices to remain firm, despite improving fresh product availability from Europe and the US. Demand in Asian markets has slowed but is likely to revert.
In whole milk powder (WMP), China and Hong Kong bolstered growth and added the most trade in the month - up 69.4% year-over-year or 14,000t. Shipments to China have increased in 11 out of the last 12 months.
Boughton said demand for milk powders is still strong in the region “with the changes in China’s internal milk use.”
Butterfat prices are steady with improved domestic EU seasonal demand. The EU balance sheet should improve but demand and supply growth will be closely aligned. The EU expanded butter exports in September by 74%, despite high shipping butter prices.
“Overall demand in developing markets remains price sensitive and may continue to pressure NZ prices. New Zealand exports of fats continued to shrink, but at a much slower rate,” Boughton said.
In whey, the EU grew shipments by 3.2% and NZ trade rose 14% year-over-year in September. NZ is selling more to the North American market, and US exports are still shrinking, down 13% in September. But US products are competitive, as prices have weakened the last few months while prices in the EU and Oceania prices are steady.
On-trend protein and fat content
The wide disparity in cheese prices should correct, according to Boughton. The EU had the cheapest prices in this year’s third quarter, and its cheese values may be influenced by SMP and butter stream returns. But an increase in plant capacity will divert milk and keep values steady.
Maxum found that EU exports rose more than 8,000t year-over-year in September, and its most recent growth was driven by stronger shipments to the US and South Korea.
In the US, market research company IRI found that ecommerce is a crucial channel for cheese growth. By the end of the year, sales will surpass $440m, which is a 54% annual growth rate over the past four years.
Suzanne Fanning, senior VP at Dairy Farmers of Wisconsin (DFW), said, "Consumer research shows that cheese aligns with on-trend food preferences because it is packed with protein and good fat.”
Convenience and variety are appeals for all categories of ecommerce, and consumers are beginning to take advantage of digital cheese shopping.
The DFW is promoting cheese produced in its state with a collection of 12 gift baskets for the holiday season. It ranges from sampler baskets at $50 to luxury sets at $150.