Maxum Foods says expanding demand in China critical to the global market balance

By Jim Cornall contact

- Last updated on GMT

Maxum Foods said there are already tight SMP supplies in EU and NZ, and next the US will tighten.
Maxum Foods said there are already tight SMP supplies in EU and NZ, and next the US will tighten.

Related tags: Dairy, Cheese, Skim milk powder

In its September report on global dairy commodities, Maxum Foods said market fundamentals through the coming quarters are expected to remain mostly supportive of prices.

Edwin Lloyd, general manager commercial, at Maxum Foods said despite the challenges posed by ground and sea logistics affecting most major supply chains, it is difficult to see any major disruption in the supply and demand landscape that could upset these settings through the remainder of 2021 and into Q1-2022.

Lloyd said northern hemisphere milk production will grow at a slower pace, while much focus in the short-term will be on the NZ season. Despite the ongoing drive to vaccinate populations, the worst affected food market channels will continue to gradually recover as new rules for living with Covid become accepted, while the damage to incomes will affect affordability, he added.

“Demand for dairy commodities remains steady as a gradual shift towards eating-out continues, although the challenges of managing the Delta variant of Covid (and others that will emerge) in unvaccinated populations will mean continued restrictions impact foodservice channels – whether imposed or through self-imposed avoidance,”​ Lloyd said.

He noted China’s expanding demand remains critical to the global market balance, as despite an apparent build up of powder inventories, major shifts in internal milk use remain supportive of ingredient imports.

There are already tight SMP supplies in EU and NZ, and next the US will tighten, Lloyd predicted. He stated the fundamentals are good for SMP with Chinese and SE Asian demand, although “landed costs (with hiked freight charges) are in new territory.”

In the US, Lloyd said milk is quickly tightening, while cheese and butterfat balance sheets should improve with stronger food service patronage, as the US herd contracts a little and challenging feed costs and quality hamper yields.

Lloyd said by observing that NZ milk supply remains a lottery.

“Strong farmgate prices will drive as much milk as possible but there is a watchout with a shift to a drier seasonal outlook which could crimp peak milk and early shoulder-season output,” ​he concluded.

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