Maxum Foods, one of Australia and New Zealand’s principal suppliers and manufacturers of dairy ingredients to the food health industries, has released its latest global dairy commodity update stating markets will remain under the strong influence of tight milk supplies while demand remains resilient.
“It seems there is little scope for something to ‘give.’ The rapidly developing and terrible conflict in eastern Europe only adds to supply-side stress,” says Edwin Lloyd, general manager commercial, Maxum Foods.
According to Maxum, the supply side of the dairy complex is not expected to improve quickly as the top producers are all in decline in Q1 2022.
While milk prices are rising, it seems cost pressures for both the farm and processing sectors are still rising faster.
Meanwhile, the weather in Oceania and the US is exacerbating the situation.
Cow and fertilizer shortage
Lloyd also highlights how fewer cows are also impacting the market. Cow numbers in the US are still declining and are not expected to rise until the second half of this year.
“While the seasonal lift in milk supplies in the northern hemisphere may, in theory, increase commodity volumes, there are several significant threats that negate this seasonal effect, keeping protein values firm,” he continues.
“Extreme prices and shortages of fertilizer supply in the EU will limit pasture growth, curtail crop yields and therefore the volumes of stored feed for later in the year.”
“Producers have fewer cows and inducements to reduce numbers further. Weather will have a major big influence, but a warmer-than-normal spring and summer are expected,” he says.
Lloyd also points out that the EU has been the significant driver of tight supplies, and the response in domestic demand for cheese and butter will also be critical in Q2 and Q3 in 2022 as households face rising costs of living.
Meanwhile, he adds: “China’s demand remains a critical factor but is expected to ease with improved local availability and slowing internal demand. The zero-COVID policy remains an impediment to a faster recovery in the short-term.”
