Milk Market
Continued tight supply globally and strong demand is pushing commodity prices higher. The Global Dairy Trade (GDT) event held on 15th November saw all commodities strengthen, with the overall product index up by 4.5% compared to two weeks earlier. Notable was the decrease in volume on offer; 13.8% lower than that traded at the previous GDT event held at the beginning of November. Fonterra has been continually reducing the amount on offer, it has also recently lowered its forecast volumes for the next 12 months. But looking to 2017, demand has mainly been from China, with no other emerging market countries really buying, it is possible demand could weaken in the New Year if China steps back. If producers start to respond to better market conditions by increasing output, prices could falter.
Muller
Muller non-aligned producers are not happy (perhaps an understatement) at the new contracts being offered to them. The contracts which are due to start on 1st January are currently being launched at meetings around the country. But producers are saying the new arrangements effectively amount to a price cut with current volume bonuses being capped at a flat rate. Muller, on the other hand, has said that the new contract is trying to achieve a better alignment with what the business requires and what it actually gets. A group calling itself Muller Non-Aligned has been set up and is gaining numbers and momentum, calling for better representation for those suppliers not on supermarket-aligned contracts. This looks set to run.
Intervention
The European Commission has proposed to start the sale of intervention stocks shortly. This is earlier than expected, but with milk production still falling and EU prices currently competitive globally, the Commission probably thinks there is ‘room’ on the market. The first release will be limited to 22,150 tonnes of SMP and if it goes ahead the tender process will have a closing date of 13th December, with the first sale on 15th December. A further 900 tonnes (approximately) is expected to go to tender in January. There is currently over 330,000 tonnes of SMP in EU intervention stores.