Maxum publishes global dairy commodity update for June

By Jim Cornall contact

- Last updated on GMT

The variation in relaxing of COVID-19 restrictions will ensure varied rates of recovery in foodservice sales while business and tourism travel will remain minor until late in 2020.
The variation in relaxing of COVID-19 restrictions will ensure varied rates of recovery in foodservice sales while business and tourism travel will remain minor until late in 2020.

Related tags: Dairy, Milk, Milk powder, Whey, Cheese, coronavirus, COVID-19

Dustin Boughton, procurement director at Maxum Foods in Australia and New Zealand, says dairy markets turned the corner in May with improving demand as COVID-19 lockdowns started to ease in most regions while milk output slowed in the US and EU.

The re-opening of foodservice outlets has lifted short-term demand for cheese and boosted confidence that the worst is behind us, Boughton said.

“The strength of that recovery is now the primary focus – once populations are free to leave their homes and eat out, the reality of consumption is likely to leave a large gap in expectations,”​ Boughton said.

The variation in relaxing of COVID-19 restrictions will ensure varied rates of recovery in foodservice sales while business and tourism travel will remain minor until late in 2020, he added.

The update notes slowing milk supply in Q2 will offset some of the slump in demand. Weather will continue to heavily influence milk output, but US government payments to farmers will support margins and may encourage a return to milk growth in Q3. Commercial action to reduce surplus milk and product will also cut milk output.

Commodity prices will be influenced by the risk of stock-build in SMP and butter, Boughton said, until there is meaningful rebuilding of cheese and butter demand in Europe and the US. Oceania prices will be impacted by the pressure on available product from the EU in Q3-2020.

The stimulation of stronger export demand in commodity ingredients at lower prices from developing Asian and MENA markets will be critical to the outlook, he noted.  These regions are experiencing their own lockdowns, the flow-on from global recession and travel restrictions. 

Spot and futures for skim milk powder improved in May as US values gained, moving ahead of European prices, Boughton said. NZ values softened but continue to trade at a premium. GDT prices jumped significantly at the most recent event on heavy Chinese buying.

Whole Milk Powder spot values were mixed in May, Boughton said.

US cheese prices jumped in May due to a short-term cheddar shortage with the combination of slowing milk supply, domestic retail demand and a rush to fill government purchases for food aid programs. This was the largest increase ever over 30 days on the exchange.

EU spot values recovered at a slower pace in May, while NZ spot values softened for the month, Boughton said.
Spot values were mixed in May for butter, he added. The EU market stabilized and began to improve as cream surpluses were avoided and retail demand for butter remained strong. Slowing milk supply due to dry weather in some major EU countries helped. NZ values softened but continues to trade at a premium.    

EU spot prices on whey were mixed in May and continued to trade below US prices, which firmed through May with better demand from China and SE Asia, Boughton concluded.

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