Report 29 – Released on July 16, 2020

WESTERN OVERVIEW:

July is traditionally a period when many Western Europeans leave work behind for multi week holidays. This year seems no different except that many people are staying closer to home or staying home.

Sources in Germany report that seasonal milk production has resumed declining after a short pause. Unofficial observations are that while milk production is declining, it remains slightly higher than last year at this time. The same observation has been made in France.Some observers in the EU expect annual milk production to increase by about 0.7 percent if feed prices remain near current levels and if rain continues to keep pastures healthy.

Expectations are that during the second half of 2020, the expected increases will tend to flow into SMP and butter production. Increased export demand for butter and SMP is expected,so production increases are likely.

A recently published European Commission analysis of European dairy markets found during 1920 that the best financial returns have resulted from producing a combination of cheese,butter and whey. The next best returns were reported to be from producing a combination of SMP and cream, then WMP and butter.

A lingering remnant of COVID-19 effects is cheese sales. Food service sales remain lower while demand from retail stores and ready to eat meals is higher. The overall annual outcome may be slightly lower total cheese consumption in the EU. However, manufacturers report strong export interest to Japan and the UK, which may well increase total exports and utilize the cheese not sold in the EU.

Applications for Private Storage Aid (PSA) for cheese during the duration of the current program, May 7, 2020 – June 30, 2020, totaled 47,711 MT according to Eucolait. This is 48 percent of the fill rate. Country allotments maxed out for Belgium, Ireland, Estonia, Italy,Sweden, Lithuania, and the United Kingdom. Among the largest cheese manufacturers, Germany used only 4 percent of its allocation. France used 48 percent. Only Poland used none of its allocation. No more applications will be accepted for the current program.

EASTERN OVERVIEW:

The fourth largest dairy product exporter behind the US, New Zealand and the EU, is Belarus.Russia is typically the main destination for Belarusian dairy exports. China is notching up,especially for whey.Cheese exports from Belarus January – May 2020 were 9 percent higher than the same period of 2019 according to Eucolait. May cheese exports were +7 percent YOY. Russia received 94 percent of cheese exports. Whey exports in May increased 23 percent YOY. China is the leading destination for whey exports, Russia is second.