A global dairy commodity update

Analysis of global dairy commodities has been released by Maxum Foods and shows the impacts of external events on the market. The world’s dairy commodity prices have weakened in Oceania and the US but the EU market is holding firm, while supply-side constraints are continuing to impact the outlook. War is having an effect on feed markets resulting in high input costs for corn, grain and fertiliser, and weak margins for milk producers. High milk prices may help relieve some of this pressure but producers might reduce input costs, resulting in market changes.

Weather is having an impact on commodities and Europe is forecast to have a hotter than average summer, while a weak La Niña and a drought in the US will have impacts elsewhere.

A global fragile feed situation is likely to continue into the next year with ongoing damage to Ukraine’s food production and sanctions on Russia and its allies having a continued impact. The war between these nations, and the tensions involving the US and EU, will have unpredictable consequences.

An uncertain EU milk output hangs over protein and fat values keeping wholesale prices firm, but in some regions buyers have retreated from high prices. Consumers have been insulated against increased prices for now thanks to high food and dairy prices — a downward pressure on demand for cheese and butterfat may not affect pricing given the supply constraints in the region.

As households come to learn to deal with inflation, the US market may see some tightening. While milk production seems to be stabilising, growth has the potential to stall.

Finally, Maxum’s analysis suggests that China’s zero-COVID policies will lead to lower short-term demand for ingredient inputs while domestic whole milk powder output is increasing at the same time. A stimulated recovery could possibly bring about a revival later in the year that could make up some lost ground.

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