EU Powder Export Highlights – May ’14
EU Powder Export Key Points:
- EU powder exports are climbing, with Jan-Mar ’14 EU WMP exports up 28% YOY and Jan-Mar ’14 EU SMP exports up 57% YOY.
- EU powder exports were previously priced out of the world market, trading at a historical premium to U.S. and New Zealand prices, but international prices are now converging.
- EU milk production is ramping up, with 11 straight months of accelerating YOY production gains, which could help make more powder products available for export. The EU Commission projects EU powder exports to increase by a compound annual growth rate of 6.4% from 2013 – 2017.
- EU powder production has declined from levels experienced in the early 2000’s, stabilizing at just under 2.0 million tonnes annually. Since 2000, EU powder production has decreased at a compound annual growth rate of -1.8%; however powder production has increased slightly throughout the past five years. Overall, EU powder production fell 21% since from 2000 – 2013.
- EU powder exports followed trend, declining 24% from 2000 – 2013. Powder exports fell from 1,039,000 MT in 2000 to 785,000 MT in 2013, with exports as a percentage of production remaining fairly flat, decreasing from 44% of production in 2000 to 42% of production in 2013. EU powder exports as a percentage of production ranged from 30% – 49% since 2000.
- EU powder export growth has been restricted due to a shortage of raw milk and, in particular, a shortage of milk fat availability for WMP. 2013 EU powder production consisted of 35% WMP and 65% SMP, with WMP production as a percentage of total powder production down from the 2000 level of 43%.
- In addition, EU powder exports were limited due to EU powder prices trading above international prices, historically. Since 2000, EU WMP prices have traded at a 6.0% premium to U.S. WMP prices, and a 6.7% premium to New Zealand WMP prices. EU SMP prices have traded 6.0% above U.S. NFDM prices, but were 1.2% below New Zealand SMP prices.
- Conditions have turned more favorable for EU powder exports of late, with international powder prices converging and EU milk production increasing.
- New Zealand and EU powder prices have declined through the past several months relative to U.S. powder prices, as shown in the chart below.
- EU milk production has experienced 11 straight months of accelerating YOY production gains. Monthly deliveries have exceeded 5% YOY growth of late.
- The more competitive EU powder prices, coupled with increased milk production, have led to a recent increase in EU powder exports. Jan-Mar ’14 EU WMP exports are up 28% YOY and Jan-Mar ’14 EU SMP exports are up 57% YOY.
- Increases of EU powder exports are expected to continue as the abolition of the EU milk quota system in 2015 is expected to result an increase in raw milk availability. The EU Commission projects EU powder exports to increase by a CAGR of 6.4% from 2013 – 2017, and stabilizing somewhat after effects of quota expiration are realized, increasing by a CAGR of 0.9% from 2017 – 2022.
- The projected increase in EU powder exports is expected to be led by SMP, which is projected to increase by a CAGR of 10.8% from 2013 – 2017, and 1.6% from 2017 – 2022. Additional percentage increases in SMP exports are expected relative to WMP as SMP is regarded as the ideal product for markets with lower purchasing and economic power, many of whom are expected to significantly increase dairy demand within the next ten years.