There are a diverse set of supply and demand influences on global commodity markets, exacerbated with an uncertain geopolitical environment with risks of escalating wars and a pivotal United States election.
The European Union remains the strongest influence on the global market with the ongoing tight butterfat market, although the direction is fragile and uncertain.
A seasonal correction in butterfat prices in coming weeks may come as milk output increases, and cream and cheese demand falters. High EU prices are attracting NZ AMF imports but the impact of these is also unclear.
Diverse regional milk production conditions across Europe, with the effects of disease, feed quality and availability, make it difficult to forecast milk supply.
Favourable margins should produce a milk supply response, but that is less assured with sustainability pressures.
Milk output is growing in other regions.
Stronger New Zealand milk output and weak global WMP demand will sustain elevated SMP and butterfat output, although avoidance of commodity powder production will be a priority.
Full-season growth is heavily weather-dependent, but high milk prices and abundant feed supplies will spur producer confidence.
US milk growth will pick up into H1-2025 with attractive margins and expanding herds to support the needs of new cheese capacity.
Oceania cheese prices will come under pressure as more intense export competition looms.
US cheddar supply will increase at a faster rate than domestic demand as new plants fill.
NZ cheese output will also lift, reducing exposure to milk powders.
EU cheese values are strongly driven by the butterfat market — while cheese prices are expected to ease with easing butterfat values, increased exports will be critical to the cheese market balance.
China’s efforts to stimulate spending and rebalance the dairy supply chain will be interesting to watch for the potential impact on ingredient imports, which remain well down year-on-year.
Australian exports continue to grow.
Australian dairy exports have grown year-on-year since December last year, reflecting stronger milk supplies and led by cheese, milk powders and fats.
August shipments featured increases across all major commodity products except dry whey and milk and cream.
Cheese exports rose 23.6 per cent year-on-year — this reflected stronger sales across all major markets.
August SMP exports were at a seven-month low, but still up 28.1 per cent year-on-year while WMP was +22.4 per cent year-on-year on relatively low volumes.
Fat exports rose 219.4 per cent year-on-year in August in commercial butter equivalents, AMF was up 132.6 per cent year-on-year and butter shipments were +45.5 per cent year-on-year.
– Edwin Lloyd, Maxum Foods executive general manager foods.