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Transcript of PROTEIN markets - Global Food Forums · PDF fileprotein markets are oversupplied Global Milk...
© 2016 Blimling and Associates, Inc. This report is prepared for the exclusive use of Blimling and Associates’ clients. Reproduction
in part or in whole without permission is strictly prohibited. This information is carefully compiled, but not guaranteed to be
complete or free from error; nor does it constitute a solicitation to buy or sell futures/options contracts. Futures and options trading
involves risk. Contact a licensed professional for more information.
5201 East Terrace Drive, Suite 280 l Madison, WI 53718 l800-726-9928 l [email protected]
PROTEIN
marketsDairy Protein Market Trends and Outlook
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• Risk Management Strategy/Advisement
• Commodity Brokerage
• Market News and Information
• Projects / Consulting
• Outsourced Services
A Little About Blimling
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Good News For Dairy
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Paying Attention
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Informing the Masses
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• The Dairy Haze
• Supplier Perspectives
• Market Forces
• Emerging Trends
• $$$$$
Journey From Milk To Protein
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• Milk is a complicated product. On one hand, it’s simply milk – something good to drink. On the other, it’s a collection of valuable components, each with different values and unique uses.
Massive Disaggregation
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Water (and Carb) Extraction
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A Capital Intensive Process
One pallet of WPC 80 requires approximately four tanker loads of whole milk
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Plenty of Co-Products To Manage
One truckload of MPC 85 requires twenty-four tanker loads of milk and generates two loads of cream and one and half loads
of permeate
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Margins Not Guaranteed• Assume plant processing 3 million pounds of milk daily
• Makes commodity cheddar, WPC 80 and dry permeate
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Volatility A Fixture
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Good Returns = Investment
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US A Primary World Supplier• US largest supply base for high protein whey
• Milk protein supplies more fragmented across regions
• Global buyers have plenty of sourcing options
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• EU milk production is….
o 6.8x bigger than New Zealand and 1.6x bigger than the US
But, The EU Matters…A Lot
EU NZUSA
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Quota Sunset Means More Milk
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• Unfettered EU milk flows required more regional processing capacity
• Sizable investment ($ billions) went into value-add proteins and infant formula
Wave of Major Investments
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Investments Skew European
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• New Zealand shifted focus, opened doors for US and EU
• US exporters are closing in on 50% global market share
A Very Crowded Export Market
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But, Global Demand Booming• Asia at near half of global whey protein imports
• China demand up sharply over past decade
• US attracting more imports, particularly from EU
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Where The Product Goes
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Stress For Buyers (And Sellers)
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• Greater price alignment among the major exporters
• Price variability remains based on different production mixes
A Global Marketplace
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Linkage To The Base Commodity
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• New whey protein capacity made supplies more abundant
• WPC 80 spot prices fell to levels not seen in 15 years
• WPI prices are down but to lesser degree
Surplus of Whey Proteins
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MPCs Tied to NDM/SMP
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China Matters For Milk Powder $
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• Global milk output up more than 2% over second half of 2015
• 2015 output grew 9 billion pounds – on par with Minnesota annual output
• Production gains coming at a time when protein markets are oversupplied
Global Milk Output Expanding
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New Zealand Woes• In second year with revenues under cost of production
• Producers rely heavily on milk powders and China demand
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Tapping The Brakes• EU milk growth must slow to help restore market balance
• Elevated payout prices giving EU producers signal to keep expanding
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A Slow (And Bumpy) Recovery
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• Good demand chipping away at surplus stocks
• Prices starting long and arduous climb up
• Delicate balance - prices can’t run up too high, too quick
• WPI prices may have room to fall given elevated premium to WPC 80
• Cheap whey solids allows for more wiggle room on plant margins
• MPC definitions expected to evolve, no standard of identity
Outlook Thoughts
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• Believe the dairy protein story
• Most processors incentivized to capture higher returns on their milk. How?
o Investing up the protein value chain: native whey, micellar casein, protein fractions, hydrolysates
o Greater product differentiation: unique functionality, color (i.e. white whey), rBST-free, Organic
• Right now, low prices could persist for 1-2 years due to supply-side pressure
• However, demand will one day outstrip supply and we know how that story ends
Looking Ahead
www.dairy.com/protein
A better way of doing business.
Blimling and Associates5201 East Terrace Drive
Suite 280
Madison, WI 53718
608.249.5030
www.blimling.com
Dairy.com3801 Parkwood Boulevard
Suite 300
Frisco, TX 75034
214.442.5928
www.dairy.com
© 2016 Blimling and Associates, Inc. This report is prepared for the exclusive use of Blimling and Associates’ clients.
Reproduction in part or in whole without permission is strictly prohibited. This information is carefully compiled, but not
guaranteed to be complete or free from error; nor does it constitute a solicitation to buy or sell futures/options contracts.
Futures and options trading involves risk. Contact a licensed professional for more information.