Global dairy commodity update

The fundamentals underpinning the global market outlook remain positive. While there has been a slight increase in milk output growth in major commodity exporters in late 2019, aggregate demand – in domestic and export markets – remained well ahead of the growth in milk supply.

The tight balance in dairy markets will gradually ease into 2020 with improving growth in milk supply as producers in the EU and US respond to better milk prices and farm margins, while the flow-on of higher product prices and the reduced availability of SMP may slowa tarade. The Coronavirus will however impact dairy trade in the short-term and cannot be ignored in our base outlook.

Dry weather in NZ, limits on growth due to weather and feed issues in parts of Europe, and ongoing challenges in Australia will help keep expansion of milk output in major exporters below 1 per cent in Q1-2020, increasing to 1.1 per cent in Q2-2020.

Skim milk powder
SMP trade slowed 4 per cent YOY in November, despite a continued resurgence in US trade which grew 44 per cent to lift US exports by 27 per cent for the three months to November. The US growth in November was again mostly due to stronger sales into SE Asia, where it is winning share due to a price advantage.

Since the clearance of intervention began, the EU accounted for 95 per cent of the growth (246,000t) in global trade of SMP to November 2019. EU exports in November were 60,003t – down 11.6 per cent YOY and a 15-month low. While the US and Canada grew trade, exports from every other major supplier fell in November.

Whole milk powder
Spot values are moving apart with NZ prices softening in December and recovering in January and remain relatively steady. The fear of disruption to trade and logistics in China due to Coronavirus weakened spot and futures prices late in the month.

The expansion of cheese imports by Russia still represented a significant portion (43 per cent) of overall market growth in the 11 months to November, while the growth in US imports ahead of the imposition of tariffs on EU product added 16 per cent in that period. Excluding these, the market grew just 2.3 per cent in 2019.

Butter trade is improving, with total tonnage up 32 per cent YOY in November but AMF trade worsened and fell 18 per cent YOY. Spot prices weakened in December as NZ values fell below US$4,000/t, narrowing the gap between EU and NZ values. NZ spot prices have since recovered with signs that demand has gained some traction at these lower prices.

The decline in global trade in whey products for the 11 months to November was 6.1 per cent, mostly the result of weaker shipments into China & HK which imported 26 per cent less, due to the culling of their pig herd to address swine fever and the imposition of punitive tariffs against US products.

Emerging dairy trends to look out for

Essentially, high-fat dairy-enriched diets are in and low-fat diets are old news. However, today’s consumer expects more bang for their dairy buck, which has driven innovation in this category. Here’s your guide to the top dairy trends which will be hitting the menus and dairy aisles this year.

Gourmet-flavoured butters are here to stay
It’s not “just” butter anymore, flavoured butters will really gain momentum in 2019. We’re not talking about the ‘brown butter’ trend, that’s yesterday’s news… Think sweet and savoury flavoured butters such as honey, pistachio, jalapeno, lemon zest, pumpkin seed and even seaweed-flavoured butters. Chefs have been taking butter to new flavour places for a while now, but in 2019 we’ll see food companies answering consumer demands and providing packaged flavoured butters sold at retail for convenience.

“How do you take your coffee? With cheese please.”
Believe it or not, that’s what people will be hearing in coffee shops around the nation this year. First it was butter coffee, commonly referred to as “bulletproof coffee”; now cheese coffee is the latest fad that baristas all over the world are catching on to. Cheese in coffee has a similar texture to marshmallows in hot chocolate: the cubes of cheese float to the top and absorb the coffee, developing a squeaky texture. It doesn’t stop there, though; cheese tea is also a trend which we expect will become mainstream by the end of the year. The cheese tea trend started in Asia, then moved to the United States, and it will finally hit Aussie shores in a big way this year. Cheese tea is usually served with either green or black tea topped with a thick layer of salted cream cheese. As the cheese melts on top, it forms a similar texture to melted ice cream with a salty tang.

Protein, protein, protein
The protein trend has taken many food categories by storm, but we believe the dairy category presents numerous opportunities to satisfy these protein savvy customers. Once just a trend amongst the health-obsessed millennials, this trend has extended to families with children as well as senior couples who are also putting high-protein foods into their shopping trolleys.

We’re now seeing high protein yoghurts, ice cream and convenient snack products which fit into the “on-the-go lifestyle” of so many consumers these days. New dairy proteins make formulating protein-fortified products even easier. We’re now seeing a completely new category for protein emerging because a form of whey protein which can function in clear beverages is now available. Consequently, “Protein Waters” is  a category that is growing at a rapid rate.

Furthermore, consumers are becoming more aware of the importance of gut health and the benefits of the fermentation process. Nutritional ingredient companies have been quick to respond to this trend and are now offering a whey protein isolate with prebiotic-promoting properties, tapping into the interest in the gut microbiome.
By Dustin Boughton, Procurement, Maxum Foods

Global dairy commodity update

The fundamentals underpinning the global market outlook continue to gradually improve as global milk supply slows and demand remains strong. This should keep prices relatively stable in the short-term. As for the recent outlook, the separate drivers of fat and protein values in Europe and Oceania have different implications for each of the respective commodities.

Minimal growth in European Union milk output, the clearance of intervention stocks, and the surge in demand for Skim Milk Powder (SMP) will continue to support protein prices, but the prospects for the European spring hold the key to sustained recovery. Butterfat prices in Europe have stabilised but will also remain sensitive to availability.
Market sentiment has improved in the US with shrinking milk growth. Cheese markets have rallied with tighter cheddar availability and risks of a shift in product mix given the divergent returns to regulated milk classes.

Global risks remain mixed, but promising signs of easing tensions between the US and China will boost confidence should that promising spin actually lead to a removal of tit-for-tat tariffs.

European Union and US cheese markets have firmed with weather-impacted tighter milk supplies. The US market has enjoyed a recent rally due to shortages of cheddar, helped by better returns to other products that has shifted milk use.

Skim Milk Powder
Global SMP trade continued to surge in December as prices remained attractive, lifting 26.2 per cent on the prior year comparable, bringing exports for the quarter 21 per cent ahead of the previous period. This reflected strong exports New Zealand and the European Union – and India, whose exports lifted to an all-time high (albeit a small quantity).

The butterfat market remains fragile, driven by the gradual weakening in European Union prices, while increased New Zealand availability has come to the market as demand remains tentative. The tighter European Union milk supply has not significantly curbed butter availability as superior returns for the butter/SMP has kept output stronger in major producers.

Whole Milk Powder
Increased New Zealand output with strong recovery in milk output has added to availability. This has kept prices lower through recent months prior to the Global Dairy Trade rally in the past six events. Prices have rallied past US$3,000/t for Oceania product, where they should hold with tightening New Zealand availability.

The imposition of Chinese tariffs has affected the United States market as export prospects slow. The market may gradually correct as supplies remains relatively tight. Shifts in shares in markets is occurring and will take some time to adjust. Meanwhile Whey Protein Concentrate markets improve.

By Dustin Boughton, Procurement, Maxum Foods

Global dairy report

Global milk supply growth is steadily declining as weather continues to be the major supply-side wildcard affecting the outlook for global dairy markets into first quarter of 2019. The full effect of any European feed shortages on milk output and product mix choices won’t be fully understood until early 2019.  These prolonged dry conditions with lower milk solids will impact product availability and we may see a lift in dairy commodity prices.

Meanwhile, closer to home, excellent New Zealand conditions have weakened, with risks of further drying due to the arrival of an El Niño event later in the season.

This could curb milk production in the Oceania region with milk intake already significantly impacted by drought and feed shortages in Australia as well.

The worsening US-China trade dispute is of course a hot topic in the dairy world and is affecting confidence and purchasing power across the Asian region. These trade wars threaten to undermine slow growth in commodity trade with weaker demand likely for China and Southeast Asia into 2019.

Whole milk powder
Whole milk powder values are trending weaker with New Zealand availability expected to grow 3-5 per cent in New Zealand peak milk supply.

Competition from Latam suppliers, taking advantages of weaker currencies, may weaken prices further. However, an expected El Niño event could dampen post-peak milk growth in New Zealand, which may impact whole milk powder values.

Skim milk powder
Skim milk powder values are set to improve in the EU as skim milk powder/butter valorisation is competitive against cheese. Skim milk powder has continued its incline as EU intervention stocks are starting to sell through, which means prices might start to firm.

The butter market is starting to free up in Oceania – in particular, New Zealand origin product, which is based on good Spring milk volumes. Australia is well down on milk flow, and hence fat is still tight. Continued growth in Chinese demand for fat related dairy products may see a floor come into this market and stabilise prices at these levels.

In Oceania, low fat values are expected to affect cheese prices. Furthermore, drought conditions in Victoria will hamper milk flow and could consequently put pressure on the supply of Australian-specific cheddar. Across the globe, the improving turnover in US cheese stocks – a result of improved food service and retail demand – could see prices firm.

Whey prices have started to level off after a few months of solid pricing. Due to the loss of Chinese demand and higher cheese output, US whey prices have drastically weakened, bringing the market back into balance.
By Dustin Boughton, Procurement, Maxum Foods – Your partner in dairy.

Australian food manufacturers facing butter shortage

Small to medium food manufacturers are currently facing a butter shortage due to a combination of a drop in overall milk production, an increase in demand nationally and a change in consumer tastes. 

According to Dairy Australia senior analyst John Droppert, more consumers are drinking full cream milk than they were previously. This has become an issue for butter production, which requires the fat removed from full fat milk.

There has been a nine per cent increase in full cream milk sales over the past 12 months, which takes a lot of fat out of the supply chain, said Droppert. An overall drop in Australia’s milk supply has not helped matters.

According to Droppert, smaller manufacturers of food products with butter as the main ingredient are facing higher prices, and distributors of butter are having difficulty sourcing supplies from manufacturers.

Manufacturers that require fewer pallets are suffering compared to bigger companies, due to a lack of long term arrangements with suppliers, resulting in a lack of guaranteed supply. Some small to medium manufacturers are even resorting to buying butter off supermarket shelves due to the price increase on the supplier level, said Droppert.

However, the analyst has assured that the shortage will flatten out soon due to increased skim milk prices on supermarket shelves.

“Anything that pulls more money from the end user at the industrial level, that puts more money in the supply chain so that does flow through to farmers eventually,” Droppert told the ABC.

“The question we have is to what extent is that being offset by low skim milk returns, with one doing particularly well and one doing particularly badly, and they’re both being made from the same one litre of milk,” he added.

World’s first chia butter

Family-owned Australian dairy company Ballantyne has launched a spreadable butter blended with chia oil.

On shelf from September, the product combines the taste and texture of traditional butter with the numerous health benefits of Australia’s most popular super food. According to the company, it is the first product of its type in the world.

Chia is high in Omega 3 which may assist with good blood flow, hormonal balance and improve mood. Being a rich source of antioxidants, it can also help limit the production of free radicals, slowing the aging process and protecting the skin from damage.

“Chia is now a mainstream super food”, according to Yuko Granger, Ballantyne Marketing and Brand Development Manager, “its benefits are widely appreciated and this should accelerate trial and adoption.”

The new chia product is the latest addition to Ballantyne’s innovative and popular spreadable range, which includes butters blended with avocado oil and extra virgin olive oil.

“Our butter products have wide appeal”, said Granger, “They allow consumers to make healthier decisions at the dairy case, but still enjoy the wholesome goodness of regular butter.”

The chia used in the new butter blend is supplied by The Chia Co, which grow their crops using sustainable farming practices throughout the Kimberly region in Western Australia.


Kerrygold dairy products

Continuing the traditional farming practices of their ancestors, with more than 6,000 years of provenance, Ireland’s dairy farmers collect milk to craft the dairy brand, Kerrygold.

Roaming freely across a hectare to call their own, up to 300 days a year, amongst the greenest grass graze the dairy cows. The result is butter and cheese, packed with naturally occurring antioxidant beta-carotene to give these products their characteristic golden colour and creamy taste.

Established in 1962, Kerrygold today is a co-operative representing 15,000 family owned farms, most of which have been handed down through the generations. Across Ireland, these small scale dairy farms are working together to share their premium, sustainably farmed and manufactured dairy products with discerning epicureans of the world.

“Our rich, creamy milk from grass-fed cows creates the most naturally produced and exceptionally tasty dairy products unique to Ireland. With a freshness and quality ensured by the care and dedication of our farmers, Kerrygold is a humble embodiment of Ireland’s most beloved craft” said Kate Saul, Marketing Manager, Kerrygold.

“The opportunity to share our Irish butter and cheese in Australia is such an honour. We hope our love of taste and tradition can be enjoyed by families and food lovers across Australia.”

The range includes:

  • Pure Irish Butter, Slightly Salted 250g
  • Pure Irish Butter, Unsalted 250g
  • Cheddar Vintage 200g
  • Cheddar Extra Mature 200g
  • Cheddar Dubliner 200 g

Unilever launches Flora with Butter and Bertoli with Butter

Unilever Australia and New Zealand (ANZ) has added two new innovative, premium products to its flagship brands.

Flora with Butter and Bertoli with Butter are being launched in Australia after successful launches in 18 overseas markets including the UK and Germany.

New Bertolli with Butter and Flora with Butter have been launched to meet the changing tastes and preferences of consumers and combine the goodness of Bertolli or Flora margarine, respectively, with the taste of butter. 

Katja Thies, Marketing Director Foods – Spreads and Savoury, Unilever ANZ said, “Our heritage with our margarine brands like Flora and Flora ro-activ continues to be at the heart of our business and we will continue to support our flagship brands.

However, we realised there was a gap in the market to provide for consumers who enjoy the taste of butter but want the spreadability of margarine. 

“We’ve seen great success overseas. In Germany, which is similar to the Australian market in terms of product, 25% of the purchase volume came from new users each month, demonstrating that people are excited to try the new blend and that there is opportunity to grow our brand loyalty.

Overall the German market had a 10.8 per cent penetration rate and 43 per cent repeat rate after one year, which is an excellent result. 

“We anticipate that the Australian market will see trade up of existing users who are loyal to our margarine brands but we also anticipate new users will come on board.” 

Globally, Unilever is committed to its Unilever Sustainable Living Plan (USLP) which aims to reduce Unilever’s environmental impact while increasing our social impact. 

New Bertolli with Butter and Flora with Butter are in line with our USLP commitments including ensuring our spreads contain no more than 33% saturated fat and use sustainable palm oil that is backed by Green Palm (RSPO) certificates.


West Coast butter earns champion award in NZ

Westgold Unsalted Butter was awarded Food for Chefs Champion Butter at the New Zealand Champions of Cheese awards on Tuesday night, ahead of marketing preparations to launch Westgold nationally.

Master Judge Russell Smith said the butter won the supreme butter award because it was, “The sort of butter you just want to slather more and more on. It’s a very good example of a technically well-made butter resulting in an even, smooth texture and delicate, sweet flavours.”

Manufactured by Westland Milk Products, Westgold butter has been sold throughout the world for more than 12 years. However, it has had limited availability on New Zealand supermarket shelves. This is about to change.

“We’ve sold Westgold internationally for years but recently decided it was time to share the West Coast’s best kept secret with our fellow New Zealanders,” said Westland Milk Products Chief Executive Rod Quin.

“If you live in Azerbaijan you probably already know that Westgold butter is a premium product.” Quin said, “but most Kiwis wouldn’t know that the champion butter in New Zealand is produced in Hokitika. The best butter starts with the best cream, and our farmers have a high percentage of Jersey cows in their herds, known for producing high quality cream.”

Westland conducted a complete redevelopment of Westgold in preparation for the launch on to retail shelves, planned for next week.

“We wanted to develop Westgold to reflect what makes the people and product unique,” Quin said. “The butter has new packaging designed to give it a uniquely Kiwi look, while retaining the golden foil that keeps the butter fresh and looking great. The new packaging will be made available to all of our consumers around the globe, but it all starts with New Zealand.”

“Behind Westgold is a tradition of making butter on the West Coast dating back to 1893. The process of butter making at Westland’s Hokitika factory has been refined over generations to become both an art and a science. Using time-honoured processes based on traditional batch churning, our butter-makers take quality, fresh cream and turn it into the butter that has now been recognised as New Zealand’s best.”

Is Margarine dead?

The reign of margarine is almost over. Sales of margarine—a plant-based spread that was once immensely popular because of its purported health benefits—have been rapidly declining and is now a cause of huge concern for Unilever, the world’s largest margarine producer and the parent company of brands that include Promise, Imperial, and Country Crock. The butter-substitute has a long history at Unilever—the company was founded through a merger between a soap maker and a Dutch company that began making margarine in 1872.

But, the truth is that butter has made a comeback: new reports argue that it’s not as unhealthy and artery-clogging as once thought, which has pushed margarine into quick decline. In response, Unilever last year created a separate business unit for its margarine operations, a move that its chief executive compared to “putting a sick child in a separate room from siblings, and showering extra care on them.” But the results have remained the same.

Margarine never had it easy

The rise and fall of margarine has been dramatic. According to researcher George W. Ladd, who documented trends in the state legislation of margarine, between the last half of the 1920s and the first half of the 1950s, per capita consumption of butter halved, while per capita consumption of margarine tripled. Using 1956 prices, this led to a $240 million loss to dairy farmers, a $430 million loss in the retail sales of butter, and a $240 million gain for margarine. One of the reasons for this dramatic increase was the repeal of various state laws that actually restricted the sale of margarine.

Given margarine’s recent decline, it’s perhaps interesting to look at the history of the anti-margarine laws of the twentieth century. They were mostly spearheaded by Big Diary, especially in Midwestern states where the dairy industry is key and, of course, loathe to lose millions in income. Consequently, in April of 1960, two Midwestern states—Minnesota and Wisconsin—were still one of the last two states to continue prohibiting the dying of margarine yellow to look more like butter.

In New York, for example, a law required retailers to tell customers in writing that what they were buying was not butter. The federal government passed a two-cent-per-pound tax in the Margarine Act of 1886, and the tax was quintupled just a few years later.

But Wisconsin was and continues to be its most vicious critic. It passed its first anti-margarine law in 1881, quickly followed four years later by the color law (which restricted the dying of margarine to resemble butter). Wisconsin didn’t repeal the law until 1967, long after margarine had become a commercial success in the U.S. Today, margarine is still prohibited in restaurants in Wisconsin unless specifically requested by a patron. This law failed to be repealed in 2011.

This article first appeared on JSTOR Daily.


Jstor Citations

Trends in State Margarine Legislation

By: George W. Ladd

Journal of Marketing, Vol. 24, No. 4 (Apr., 1960), pp. 65-69

American Marketing Association

Warrnambool Cheese and Butter adds a new channel to its brand

Warrnambool Cheese and Butter, Australia's oldest dairy operating since 1888, has acquired Lion Dairy and Drinks' everyday cheese brands – Coon, Cracker Barrel, Mil Lel and Fred Walker and now will be focussing its energies on its Foodservice business. 

Taking over the iconic Coon, Cracker Barrel, Mil Lel and Fred Walker brands, coupled with its award-winning Warrnambool Heritage cheddars, provides WCB the platform to leverage and grow in the Foodservice channel, the company said.

"We have always provided the input cheese to the Lion business and now we have these iconic brands coupled with our award-winning Warrnambool Heritage range it makes perfect sense to beef up and have a deliberate focus on our Foodservice offering," said WCB's National Business Manager for Foodservice & Industrial, Damien Sorensen.

"That means more simplified processes, a more efficient supply chain, better on-time delivery, regular customer contact – all the things that our customers expect a key supply partner to be. We just want to be easier to deal with, whilst providing a premium dairy offer," Sorensen said.

This focus has included boosting its Foodservice team around the country – a team that will continue to grow with the needs of the business and requirements of our dynamic and changing marketplace.

While WCB has had a relatively low profile in Foodservice previously, it is the engine-room to many of the country's highest profile dairy processors and this is just the beginning for WCB with bold plans to make Foodservice a key ingredient of its business.

To ensure the continued quality and consistency of all its products, WCB has also invested in additional staff including recruiting highly regarded cheese grader Dave Mellor from UK dairy giant Pilgrims Choice.

"Thousands of tonnes of cheese comes out of the dairy every year and it is up to me to grade it all. It's lucky I love cheese," Mellor said.

Fonterra lowers CAPEX by $600m & revises milk volumes

 Fonterra Co-operative Group Limited has today announced that the forecast total payout available to farmers in the 2015/16 season will be $4.25-$4.35, comprising:
·         Forecast Farmgate Milk Price $3.85 per kilogram of milksolids (kgMS)
·         Forecast earnings per share range of 40 – 50 cents per share.
Fonterra has also announced Fonterra Co-operative Support of an additional 50 cents per shared-up kilogram of milksolids to support farmers this season.
Revised 2015/16 Farmgate Milk Price Forecast
Chairman John Wilson said the Farmgate Milk Price forecast has been reduced from $5.25 kgMS to $3.85 per kgMS due to the continued significant imbalance in the global dairy market between weak demand and surplus supply.
“Current prices are unsustainably low and we are seeing them beginning to impact production levels globally.  We have confidence that prices will recover over the course of the season. However, it will be a tough season for our farmers.
“We know the global dairy market will improve.  The hard thing to call at the moment is exactly when and how quickly,” said Mr Wilson.
Forecast available for payout
Chief Executive Theo Spierings said: “As part of this work and given the current pressures facing our farmers, we have reviewed our capital expenditure for the next two years. As a result we are now targeting a spend of $500million – $600million less for 2016 financial year compared to FY15.
“We will continue to update our farmers and the market on business performance and the delivery of expected gains from the transformation of the business as the year progresses,” said Mr Spierings.
Mr Spierings said Fonterra continues to believe strongly in dairy and this farmer support is an investment in the future of the Co-op.
A Fonterra Co-operative Support schedule will be made available as part of the application process.
Milk volume forecast 2015/16
Fonterra has reduced its New Zealand milk volume forecast for the 2015/16 season to 1,589 million kgMS, 2 per cent lower than the previous season.
Chairman John Wilson said the revision reflected the likely impact of farmers using more traditional practices to manage their farm businesses within the limits of a low payout forecast.
“We expect to continue seeing our farmers make these sorts of on-farm decisions – particularly in light of today’s announcements,” said Mr Wilson.