Maxum Foods’ global dairy commodity update for May

By Jim Cornall contact

- Last updated on GMT

Pic: Getty Images/Tatomm
Pic: Getty Images/Tatomm

Related tags: Dairy

Maxum Foods has published its monthly dairy commodity update.

Edwin Lloyd, executive general manager – foods, said dairy commodity prices have weakened from peaks in Oceania and US, but the EU market remains firm.  He said supply-side constraints remain a feature in the outlook, as the effects of war on feed markets will mean extended periods of high input costs (corn, grain and fertilizer) and weak margins for milk producers.

“Higher milk prices may alleviate some of the pressure, but most milk producers typically recoil from high costs by reducing inputs rather than looking longer term at their expected business cashflows,”​ Lloyd said.

He added weather is also an issue, as Europe is forecast to have another hotter than usual summer, and other regions face a weaker La Niña, while a worsening US drought threatens water supplies.

The effect of the fragile global feed situation will run into next year with the ongoing damage to Ukraine’s food production and sanctions on Russia and its allies, Lloyd said, adding the escalating tensions between Russia, EU and the US are unpredictable.

“Uncertainty about EU milk output hangs over protein and fat values, keeping wholesale prices firm, but buyers have retreated from strong prices in some developing regions. The higher food (and dairy) prices have not reached many developed world consumers yet – the downward pressure on demand for cheese and butterfat may not significantly affect pricing given the supply constraints in the region,”​ Lloyd said.

“The fundamentals suggest a tighter US dairy market, subject to the risks for cheese demand as households learn to cope with inflation. While milk production looks to be stabilizing, growth is occurring in limited regions and may soon stall. The US drought is worsening.”

Lloyd said China’s zero-Covid restrictions will also weaken short-term demand for ingredient imports while domestic whole milk powder output is increasing in the short term, while a stimulated recovery could bring a revival later in the year to recover some lost ground.

Related topics: Markets

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