China’s ports have begun to open after a series of covid-19 lockdowns affected much of the country from earlier this year.
The Ministry of Transport has announced that Shanghai port has almost fully rebounded after the lockdown, at 95.3% of average operations levels. Major ports within China have reported combined container throughput increases of 4.2% in May to April, however still down 1% year-on-year (YoY).
While port operations have increased, truck driver shortages still continue to affect the supply chain, with road freight traffic indexes for Shanghai down 81% in May YoY, although a 3% increase to April.
The ports are dealing with a backlog of over 260,000 20-foot containers, expected to take months to recover from.
While the country is yet to fully return to normal activities and the backlog does pose a short-term issue, increased consumption in China as supermarkets and restaurants open and recovery from lower domestic production should push demand for global dairy products within the country. We anticipate that this could be realised in commodity prices in the coming weeks as China further opens.
What happened last week in dairy?
Synlait revises current season milk price forecast & next season opening forecast
Synlait has revised their milk price for the 2021-22 season, falling in line with Fonterra’s Farmgate Milk Price forecast midpoint.
Synlait’s revision brings the dairy company’s forecast milk price to $9.30/kg MS, down 30 cents from the previous forecast. Chief executive Grant Watson stated that the drop was a result of global disruption with the conflict in Ukraine, China’s lockdowns, global inflation and supply chain disruptions affecting commodity prices. Despite the drop, Watson reiterated that the price will be the highest milk price paid by Synlait.
The company also released their 2022-23 opening price with a forecast of $9/kg MS, stating that current exchange movements and high commodity prices support a higher milk price. Watson does reiterate, however, that the volatility of global conditions will have a large piece to play in the ending price for next season.
The final milk price will be announced when Synlait announces their full year financial result in September.
Argentina’s April exports jump while the season remains relatively stagnant
Continuing this season’s trend, Argentina continues to ramp up dairy exports with April’s figures outlining a significant increase in total dairy exports. Recent increases in milk production have allowed Argentinian exporters to ramp up dairy exports, chasing high world prices.
Total dairy export volumes out of Argentina increased 42% in April YoY, on top of 15% in March YoY, bringing the country’s total dairy volumes up 10% year to date (YTD). Algeria, Brazil, and Chile all significantly increased their imports of Argentinian dairy, up 150%, 17%, and 6% YoY respectively. Season to date, Argentina’s dairy exports have increased 1.1%.
The key driver for increases in Argentinian dairy was the large volume of whole milk powder (WMP) sold in April, a 139% increase YoY to 12,808mt. Majority of this went to Algeria, with Rest of South America also increasing their purchases significantly. Season to date, total WMP exports are 1.1% behind last season, however, WMP exports to Algeria are up 34.2%. Skim milk powder (SMP) also had a big month with Argentina’s SMP exports increasing 208% YoY, with exports to North America accounting for most of this increase.
Other commodities remained relatively flat or showed declines, with cheese exports increasing only 2% YoY, while butter and anhydrous milk fat (AMF) declined 52% and 21% YoY, although not off large volumes the previous year.
Total dairy export values continue to impress, up 68% YoY and 30% YTD. Every commodity out of Argentina, with exception to butter, increased on a value basis with WMP and SMP exploding 181% and 287% from a value basis YoY. Season to date, dairy export values have increased 18% with WMP values up 22.8%.
While this was a good month for Argentina’s total dairy exports, the country is still reporting only a minor increase in exports season to date. As production continues to ramp up and consumer demand decreases due to inflation, we can expect to see large exports out of the country.
