DAIRY MARKET REPORT – FEBRUARY 2012

Since the awareness, prior to Christmas, of the impending arrival of butter from New Zealand, the butter market dropped dramatically and customers realised that they should cover through for Q1.  Because the weather over the Christmas period was mild there was more milk available and cream was churned into butter.  With the weakness of the Euro v Sterling it also meant that exports of cream to the continent were not as attractive as previously which kept butter prices at a lower level than in the winter of 2011.

At the moment there is stability in pricing, however with Private Storage Aid looming on the horizon this could possibly change the situation and perhaps indicate to customers and manufacturers there could be a reason to place butter into this scheme whilst prices are lower than usual.  If this did occur it could well take butter from the open market and tighten supply.  But, as always, until we get nearer to the time it is purely speculative.  The EU Commission have not, as yet, published the aid available for PSA this year and this might make potential uptake of the scheme an easier decision to reach for interested parties.

Powder prices however, are increasing as there is more demand from world markets at present.

Cheese prices have settled but by relatively small amounts compared to the movement in butter prices.  Continential cheeses including cheddar have seen the benefit of the improved Sterling/Euro exchange rate.  However, UK cheddar prices have not felt the need to respond fully to these prices as they feel that demand and stock are in balance.  Milk prices on the continent are holding or starting a slow recovery and the slight fall back in the exchange rate has steadied the market.  With peak milk production on its way it is still not clear if this situation can hold.

 Bulk Butter prices are falling and this process is expected to continue into the early New Year. The arrival during Jan – March of 30,000 mt of New Zealand butter has sent a worrying shockwave through the European traders who have moved quickly to reduce prices despite the relatively tight supply situation. New Zealand will still have the option to ship another 45,000 mt to E.U. later in the year but for the moment this is pure speculation.

 Milk powder prices have remained stable and future prices look untroubled although it would seem inevitable that milk prices will ease back over the next few months, supply and demand being in balance, pressure could push prices lower.

 Similarly Cheddar prices have settled into a range which shows little sign of moving as supplies are sufficient to meet demand. European/Irish cheddar prices are subject to the vagaries of the Sterling/Euro exchange rate and at the current rate (1.1650) there is little to encourage imports. However there is talk of a better rate (bank talk) and if European prices in euro fall the opportunities for cheaper cheddar may yet present themselves.

Traditionally commodity prices fall post Xmas but this did not happen in early 2011, in deed prices went up, so although butter prices are already falling there is now no certainty regarding other products.

Market Report

Staple Food Group can source  a wide variety of products including:

Butters, milks, concentrated milk, milk powders, infant and toddler nutrition, dairy drinks, yoghurts, desserts, cream, coffee enrichers, cheese and cheese alternatives.

Wheelbarrow Butter will be changing to Frico Butter which has become FrieslandCampina’s world wide brand for their new range of butter.

What ’s the difference between WHEELBARROW and FRICO Dutch Butter? ABSOLUTELY NOTHING.

A world wide brand means consumers will become aware of the Frico  brand when they visit other countries and will recognise the brand on the UK retailers shelves

and even better there will be a complete range introduced over the next year as detailed below.

So the long established pedigree and the very loyal client base will continue. Frico/Wheelbarrow reputation has been built on the delicious pure natural taste. Frico/Wheelbarrow Butter is ideal for cooking, baking and spreading. Available to Major Multiples, Foodservice and Cash and Carry.

Product Range includes:

Frico/Wheelbarrow easier spreading Butter is produced in Holland. Frico/Wheelbarrow has the delicious creamy taste of pure natural butter and contains no artificial additives.

Frico: 1kg, 250gm blocks salted and unsalted

Frico Frying Butter 250gm block (available soon)

Frico: Tubs 225gm salted and unsalted

Frico: Cups (portions) 10gm

Packaging

Salted and Unsalted 250gm – 16 x 250g – 15 x 16 cases (180 boxes  per pallet)    

Since the end of the holiday season and the return of buyers into the market, all dairy prices have risen. There is a particular demand from the continent for bulk cream and the currency has made this even more attractive for UK manufacturers. Any butter stocks they may already have are being held in anticipation of even higher prices in the near future. Private Aid Stocks are higher this year compared to 2010, although still down on 2009. This stock has entered store at prices close to the current market so does not represent a risk to the stockholders. However, it is believed that a large percentage of this stock is already sold through on contract to end users to be drawn off over the next few months.

Cheese

During July and August, whilst butter and cream prices moved sharply down then back up again, cheese prices, particularly for cheddar, remained relatively unaffected. There has been more effective buyer resistance to higher prices but there is a belief that with higher milk prices a further push from the manufacturers to increase their return on cheddar will be more successful. Much will turn on the supply of milk during the next month or two as a prolonged cold wet period could threaten the balance of supply and demand.

Imported cheese prices are high at the moment resulting from a weak pound Sterling proving to be too much to compensate for the still bullish European market prices. As ever a return to form of Sterling and a fall in European ex factory prices could signal a change of fortunes. Watch this space.