Maxum Foods global dairy commodity update for July

Dustin Boughton, procurement director at the company, said wholesale dairy markets rebounded strongly from the impacts of COVID-19 with worldwide closure of foodservice outlets – most importantly in the US and Europe - and the cessation of cross-border travel.

Trade was slower than the 2019 comparative for the first four months of 2020, impacted by some logistical difficulties due to COVID-19, but also against strong 2019 numbers for milk powders when prices were much lower, he said.

There are some timing factors: the peak of WMP trade was pushed earlier with the Chinese New Year timing this year, while the early 2019 run-out sale of SMP in the EU continued into March – meaning comparatives were strong.

Sustained strong retail sales, refilling foodservice outlets, government aid spending in the US and slower milk supply effects have hauled cheese and butter prices off the floor, Boughton explained.

He said a deep recession is unfolding due to the huge losses in income due to business closures, which will erode household spending in western markets and weaken developing world economies.

The July report says as a recession takes hold, food spending in western economies will be impacted, reducing discretionary spending, reducing eating out, and causing less spending in the grocery store.

The effect on ongoing cheese demand will be the most important driver of the impact on dairy markets, as the processor response to weaker demand will push more milk to powder driers in coming months, Boughton said.

Demand from export markets, also with weak food service sectors for the rest of the year, will not help, despite prices being more attractive.

Skim milk powder (SMP) and nonfat dry milk (NFDM) prices continued steady, recovering after the worst of the COVID-19 shocks, as cheese and butterfat markets also stabilized.