MIV outlook for 2019 firmer than last year

The German Dairy Industry Association (MIV) has given its view on the market outlook for 2019.

“In principle, the signs are better this year than in the previous year. However, it is difficult to make a forecast given the question marks that are still associated with Brexit,” said Peter Stahl, chairman of the association. That being said, the starting position at the beginning of this year is much firmer than the previous year. Milk delivery will not rise disproportionately in the coming months in Germany, according to MIV.

At the beginning of this year, milk deliveries are around 3.3% less compared to last year. But all in all, a new record delivery to German dairies of an estimated 32.4 million tons is expected for 2018. The German milk price estimate for 2018 is about 34.5 cents/kg (at 4.0% fat) on average. This is below the 36.2 cents of the previous year, but still slightly above the ten-year average.

After the weak start to the year, the overall result from Stahl’s point of view can still be described as neat. Firstly, development has been supported by good utilisation of milk fat for a long time. Secondly, exports have relieved the market in particular. Germany’s exports of dairy products remained stable around the high level of 2017, with exports of cheese and skimmed milk powder in particular expanding.

Demand for some dairy products, such as butter, has picked up significantly due to the Christmas rush and after the consumer sensed that the price spikes were over. In the first 11 months of 2018, sales of butter in food retail had previously fallen by 6.1%. The decline was partially, but not completely, compensated by a further increase in sales of mixed spreads.

EU stocks of skimmed milk powder in public storage has been reduced by almost 90% compared to the beginning of 2018. In Germany the warehouses have been cleared, while EU-wide, 22,000 tons are still for sale. The milk powder market has nevertheless picked up, also thanks to good foreign demand for milk protein.

Even though some dairies had to cut their milk prices in December, a stable market picture should emerge in the first quarter.
The MIV is concerned about rising costs, both on the part of producers and dairies. Especially in energy, packaging and disposal prices have risen.

“Not all dairies were in the black,” noted Eckhard Heuser, general manager of the MIV. Price increases are therefore important in the next negotiations for all parties involved in the milk value chain. A positive factor for the German dairy market is China’s high demand for European dairy products as well as the EU’s concluded free trade agreement with Japan. Also New Zealand and the US report increasing milk deliveries, which could lead to increased competition on the international markets.

In addition, oil prices recently weakened the purchasing power of various import countries, and the strong US dollar is putting pressure on the currencies of various emerging economies.

The new Packaging Act has already pushed up the costs of packaging recycling and thus the fees for the Green Dot, Heuser added.

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