8- Eastern Europe Butter/Butteroil Skim Milk

DAIRY MARKET NEWS, JULY 5 - 9, 2021 - 8 - VOLUME 88, REPORT 27

INTERNATIONAL DAIRY MARKET NEWS - EUROPE Information gathered June 28 - July 9, 2021 Prices are U.S. $/MT, F.O.B. port. Information gathered for this report is from trades, offers to sell, and secondary data. This bi-weekly report may not always contain the same products and/or regions. Future reports may be included or withdrawn depending on availability of information. MT = metric ton = 2,204.6 pounds.

WESTERN OVERVIEW to continue, at least through July. Most sellers and buyers seem okay WESTERN EUROPEAN OVERVIEW: Sources in Germany with that. and France, the largest milk producing countries in Western Eu- rope, have noted than the seasonal decline in milk production Western Europe, 82% Butterfat, Free on Board - Port Butter seems to have increased. Hot weather is cited. At the end of June Price Range - $/MT: 4,475 - 4,975 anecdotal early reporting pegs the average weekly decline in Ger- many as -1.5 percent. That was about 1.5 percent below 2020 YOY Western Europe, 99% Butterfat, Free on Board - Port Butteroil for the week. French dairy sources believe the last week in June, Price Range - $/MT: 5,325 - 6,400 milk production declined about 2 percent from the previous week.

July brings the annual period when many Western Europeans take multi week summer vacations. While some people are not able to travel to favored destinations, many acceptable alternative destina- SKIM MILK POWDER tions are open for tourists. This will have the effect of reducing dairy market transactional activity in coming weeks. The skim milk powder price range in Western Europe moved lower. Prices weakened in Belgium, France, and Netherlands. German pric- With the first half of 2021 behind us, sources in Western Europe es tended to be steady. People involved in Western European skim now expect 2021 milk production to end the year up about 0.8 per- milk powder markets say the market tone is calm. Inquiries for new cent from 2020 milk production. This is lower than projections as orders have declined, a typical occurrence for the July holiday peri- 2021 began. A colder than expected start to 2021 for several od. Almost all current production has already been sold. months is one factor. Another factor is expectations that cow slaughter will increase later this year. The reduced dairy herd will SMP plant managers are anticipating being on the receiving end of affect milk production. There has been a trend of smaller herd sizes higher milk intakes through the rest of 2021. As more buyers come in some countries. For example, a German source commented that to consider pacing of future transactions, the likelihood of more the number of dairy cows in Germany has declined to the lowest SMP availability further eases any feeling of urgency hanging over number since reunification after the fall of the Berlin Wall. Rising the timing of deals. feed costs are cited by some dairy producers as motivation to re- duce herd size. The perhaps over cited shortage of freight capacity, in some situa- tions, is a genuine factor limiting current SMP exports from Western Europe. Asian markets remain a primary destination for SMP from Western Europe. The outlook ahead for Asian import demand seems EASTERN EUROPE to be steady.

Belarus continues to be a significant dairy product exporter in East- Prices for: Europe, All First Sales, Free on Board - Port, Convention- ern Europe according to sources. Russia is reported to remain a al, and Edible Skim Milk Powder primary export destination, particularly for cheese and butter. Chi- Price Range - 1.25% Butterfat; $/MT: 2,925 - 3,125 na has been increasing dairy product sourcing from Belarus, espe- cially SMP. May 2021 exports of butter, SMP and WMP were noted to be higher than May 2020.

WHEY

BUTTER/BUTTEROIL The whey powder price range in Western Europe moved lower. While sources note that current pricing is high in a historic sense, the The Western European butter price range sagged. Butteroil prices momentum for maintaining prices seems to have stalled. Continuing moved higher at the low end of the price range but are steady at the strong cheese production has kept whey stocks higher. Even with top. strong export demand from China in particular, there seems to be plenty of whey. Butter prices in many countries trended lower each week during the two weeks of the reporting period. French prices held up the This has emboldened some buyers to become more price sensitive. high end of the price range. Some French butter manufacturers Manufacturers are making good profits at current price levels. That continue to be able to achieve price premiums from certain buyers. eases the decision as to whether to be a bit more flexible to close Butter pricing trended down through Belgium, Germany, and Neth- deals. A compounding factor is the July holiday period, resulting in erlands. less market activity.

There has been discussion suggesting that going forward, some of Prices for: Western Europe, All First Sales, Free on Board - Port, the anticipated higher 2021 milk production will head into butter/ Conventional, and Edible Dry Whey SMP. That expectation is said to have reduced buyer willingness to Price Range - Non-Hygroscopic; $/MT: 1,125 - 1,350 pay the prices of recent weeks. Butter sales have slowed as con- sumers leave for holidays. Many buyers are well stocked. Wait and see is how many buyers now roll. Export interest is also steady, with limited new inquiries. CONTINUED ON PAGE 8A Looking ahead, the slower nature of the butter markets is expected DAIRY MARKET NEWS, JULY 5 - 9, 2021 - 8A - VOLUME 88, REPORT 27

CONTINUED FROM PAGE 8

WHOLE MILK POWDER

The whole milk powder price range in Western Europe declined, like the trend of some other manufactured dairy products. WMP pricing is inconsistent within Western Europe. Demand is quiet. Most customers within the EU are stocked for current needs. Manu- facturers tend to produce for orders already booked, so production schedules are being notched back. WMP manufacturers in Western Europe tend to focus on internal sales. Pursuing exports is not very much of a factor.

Prices for: Europe, All First Sales, Free on Board - Port, Conven- tional, and Edible Whole Milk Powder Price Range - 26% Butterfat; $/MT: 3,725 - 3,925

DAIRY MARKET NEWS, JULY 5 - 9, 2021 - 8B- VOLUME 88, REPORT 27

INTERNATIONAL DAIRY MARKET NEWS - OCEANIA Information gathered June 28 - July 9, 2021 Prices are U.S. $/MT, F.O.B. port. Information gathered for this report is from trades, offers to sell, and secondary data. This bi-weekly report may not always contain the same products and/or regions. Future reports may be included or withdrawn depending on availability of information. MT = metric ton = 2,204.6 pounds.

OCEANIA DAIRY MARKET OVERVIEW Secondary Sourced Information:

AUSTRALIA: July 1 marked the opening of the new milk season in At GDT event 287 on July 6, 2021, the butter all contracts price, Australia. Obviously, seasonal milk production will only increase $4,458, decreased 3.2 percent. The August contract, $4,568, de- from here. For past seasons a graph of production shows a nearly creased 1.1 percent. vertical line rising to the peak in October. There will be abundant milk flowing into plants rather quickly. January – May 2021 butter exports from New Zealand 188,000 MT, decreased 4.3 percent from January – May 2020, according to CLAL Australian milk producers tend to contract seasonally for their milk data made available to USDA. The main export destinations January output. During the last few weeks leading into the new season some- – May 2021, quantities, and percent change from January – May thing of a bidding war broke out. Major processors began lifting of- 2020, were China, 48,860 MT, +41.95 percent; Philippines, 12,390 fering prices to be sure they have enough milk geographically located MT, +4.03 percent; and Australia, 12,002 MT, -23.72 percent. for dairy manufacturing plants they operate.

A large dairy cooperative increased the offering price twice after the initial price was announced. The coop’s average national price as SKIM MILK POWDER reported by NZX is 6.96 Australian dollars/kg milk solids. As a country with huge land area and climatic variety, prices offered in The Oceania skim milk powder price range is lower at each end. The varied regions do differ from other regions. Among the highest prices lower range dip reflects GDT event activity. The upper range price noted, a processor in northern Victoria and southern New South reflects non-GDT transactions. Wales reportedly offered 7.50 Australian dollars/kg milk solids. The view in New Zealand is that the supply of SMP has grown be- yond demand. Buyers are very comfortable in being more aggressive NEW ZEALAND: New Zealand sources believe that supplemental in making purchase decisions. Middle Eastern SMP buyers are ob- feeding helped to boost New Zealand milk production in the season served to suddenly be far less eager to add to SMP stocks they al- just ended. A current concern for the new season is the likelihood ready hold. Asian buyers remain active but are increasingly price that migrant dairy workers will not be able to come into New Zea- driven. SMP is expected to be long for a while in Oceania. land to work for a number of months due to COVID-19 related travel restrictions. The worry is that dairy owners facing labor shortages Prices for: Oceania, All First Sales, Free on Board - Port, Conven- might adjust for lower milk production. tional, and Edible Skim Milk Powder Price Range - 1.25% Butterfat; $/MT: 3,175 - 3,475 Sources with NZX indicate that some banking analysts continue to believe that new season milk prices in New Zealand will end up in Secondary Sourced Information: the 8.00 New Zealand dollar/KG milk solids – 8.20 range. The lower results from the GDT event earlier this week did not cause the sea- At GDT event 287 on July 6, 2021, the SMP all contracts price, sonal forecasts to be altered. $3,126, decreased 7.0 percent. The August contract did not trade. The September contract, $3,127, decreased 7.0 percent. May 2021 New Zealand milksolids reported by DCANZ, and NZX, 99,675 million kg, are up 9.4 percent from May 2020 milksolids. January – May 2021 SMP exports from New Zealand 143,000 MT, Season to date milk solids through May 2021 increased 2.7 percent decreased 15.8 percent from January – May 2020, according to from last season through May 2020. CLAL data made available to USDA. The main export destinations January - May 2021, quantities, and percent change from January – May 2020, were China, 54,076 MT, +20.17 percent; Indonesia, 15,218 MT, -10.83 percent; and Thailand, 11,351 MT, -12.91 percent.

BUTTER/BUTTEROIL

The Oceania butter price range widened as the low end decreased CHEESE and the top end firmed. This week’s GDT event brought the low end of the range down. In contrast, sales from manufacturers caused the The Oceania cheddar price range is steady at the top but lower at the top range firming. Weaker GDT event prices are said to reflect di- bottom. Sales of cheese from manufacturers sustained the top range minishing buyer interest in paying higher prices. While many observ- price. Lower range weakness reflects GDT event activity. The some- ers anticipated the price weakness, the degree of weakness was not what detached nature of recent Oceania cheese pricing from other generally expected. dairy product price trends is described as having come to a reality checkpoint. Many buyers have decided that there is more cheese Continuing active buying from China helped maintain the higher available than they had expected. A nagging conundrum as to wheth- pricing. Increased buying activity from Southeast Asia and North er pricing was too firm has also now been answered, at least for now. America buttressed the demand from China. Prices for: Oceania Cheese, Cheddar, 39% Maximum Moisture, Free Oceania, 82% Butterfat, Free on Board - Port Butter on Board - Port, Price Range - $/MT: 4,350 - 4,750 Price Range - $/MT: 3,900 - 4,450

CONTINUED ON PAGE 8C DAIRY MARKET NEWS, JULY 5 - 9, 2021 - 8C- VOLUME 88, REPORT 27

CONTINUED FROM PAGE 8B Exchange rates for selected foreign currencies: July 5, 2021

Secondary Sourced Information: .0104 Argentina Peso .0135 India Rupee .7529 Australian Dollar .0090 Japan yen At GDT event 287 on July 6, 2021, the cheddar all contracts price, .1963 Brazil Real .0504 Mexican Peso $3,949, decreased 9.2 percent. The August contract, $4,095, had no .8102 Canadian Dollar .7026 New Zealand Dollar comparison with event 286. .0014 Chile Peso .2635 Poland Zloty 1.1865 Euro .0229 Uruguay Peso January – May 2021 cheese exports from New Zealand 167,000 MT, increased 18.9 percent from January – May 2020, according to Conversion example: To compare the value of 1 US Dollar to Mexi- CLAL data made available to USDA. The main export destinations can Pesos: (1/.0504) = 19.8413 Mexican Pesos. Source: "Wall Street January - May 2021, quantities, and percent change from January – Journal" May 2020, were China, 43,763 MT, +87.49 percent; Japan, 26,264 MT, -5.50 percent; and Australia, 18,329 MT, -5.23 percent.

WHOLE MILK POWDER

The whole milk powder price range in Oceania is steady at the top but lower at the bottom of the range. Price weakness has been expected but not as much as registered. The upper end of the range was held by off GDT sales from manufacturing plants. GDT sales de- fined the lower end of the price range. At this stage in the season, available volumes are relatively low and spatial locations of WMP availability can be uneven. Some WMP has been removed from the GDT platform for auctions between August and January 2022, due to demand for WMP outside the GDT. Another unknown is how soon new season WMP will be available in significant volumes. The last season ended strong, which led to more WMP availability. Most of that has now been sold, so the uncertainty is when WMP availability will tick up seasonally. These factors contribute to the diver- gent factors affecting the price range.

WMP buying from Asian countries along the stretch of North to South stepped up volumes. The same is reported for buying interest from Africa and Central America.

Prices for: Oceania, All First Sales, Free on Board - Port, Conven- tional, and Edible Whole Milk Powder Price Range - 26% Butterfat; $/MT: 3,850 - 4,150

Secondary Sourced Information:

At GDT event 287 on July 6, 2021, the WMP all contracts price, $3,864, decreased 3.0 percent. The August contract, $4,059, increased 0.6 percent.

January – May 2021 WMP exports from New Zealand 724,000 MT, increased 10.0 percent from January –May 2020, according to CLAL data made available to USDA. The main export destinations January - May 2021, quantities, and percent change from January – May 2020, were China, 327,008 MT, +48.23 percent; Sri Lanka, 41,371 MT, +15.38 percent; and United Arab Emirates, 38,112 MT, -21.63 percent.

DAIRY MARKET NEWS, JULY 5 - 9, 2021 -8D- VOLUME 88, REPORT 27

INTERNATIONAL DAIRY MARKET NEWS - SOUTH AMERICA Information gathered June 28 - July 9, 2021 Prices are U.S. $/MT, F.O.B. port. Information gathered for this report is from trades, offers to sell, and secondary data. This bi-weekly report may not always contain the same products and/or regions. Future reports may be included or withdrawn depending on availability of information. MT = metric ton = 2,204.6 pounds.

SOUTH AMERICA OVERVIEW

Milk yields are increasing off dairy herds in the main dairy basins of Argentina and Uruguay. In general, milk supplies are meeting most production needs from dairy processors. There are reports retail sales in Brazil are moderately healthy for the near term. Cheese and yogurt sales are steady to seasonally lighter. Some operations are prioritizing UHT milk processing over other dairy product productions. Powdered milk inventory levels are increasing for some operations. WMP/SMP markets are transitioning with some downward price movements at various offshore markets.

SKIM MILK POWDER

Skim milk powder (SMP) F.O.B. export prices are a bit lower in the Southern Cone of South America, resulting in some downward price movements at various offshore markets. There are reports additional condensed skim milk volumes are clearing into dryers. In turn, some operations’ SMP production schedules are fairly active. SMP inventory levels have become a bit more available in the market. Export ac- tivities are somewhat mixed. Market participants are working through spot/contract needs. However, there are many buyers/traders watch- ing to see where SMP pricing leads.

Prices for: South America, All First Sales, Free on Board - Port, Con- ventional, and Edible Skim Milk Powder Price Range - 1.25% Butterfat; $/MT: 3,000 - 3,125

WHOLE MILK POWDER

Whole milk powder (WMP) export pricing shifted down in the South- ern Cone of South America. Manufacturers’ WMP production schedules are fairly strong. Some suppliers are offering additional loads to spot/contract customers. Buying demands are steady to a bit flat at this time. There are reports inventory levels are stable for the near term. Currency exchange movements continue to factor into some dry product price points on various markets. Whole milk powder markets are transitioning, following the price changes of other dairy protein and butterfat markets.

Prices for: South America, All First Sales, Free on Board - Port, Con- ventional, and Edible Whole Milk Powder Price Range - 26% Butterfat; $/MT: 3,475 - 3,825