The U.S. Whey Market. Mr. David L. Thomas. CEO, American Dairy Products Institute

Transcription

1 The U.S. Whey Market Mr. David L. Thomas CEO, American Dairy Products Institute EWPA General Assembly, June 2016

2 U.S. Milk Production

3 U.S. Milk Production (Million Liters) Average growth rate of 1.79% per year the last ten years primarily driven by increased production per cow production: 91.8 billion liters % over % in cow numbers +0.60% in production per cow (9,856 liter) 93,000 91,000 89,000 87,000 85,000 83,000 81,000 79,000 77,000 75,000

4 U.S. Milk Production 1 st Quarter of 2016 up 1% vs. prior year Q1 milk production is up 1% vs (adjusting for leap year). 7,000 more cows (+.075%) 0.92% increase in production per cow 24,000 23,000 22,000 21,000 20,000 Q1 Milk Production (million liter)

5 Weaker milk prices going into 2016 The average all-milk price paid to producers in 2015 = $17.11/cwt. 29% less than YTD 2016 is down another 7% vs 2015 Class III (cheese milk) prices outpaced Class IV (powder/butter). April Prices Class III: $13.63/cwt (28.0 euro cents/liter) Class IV: $12.68/cwt (26.0 euro cents/liter) $24.00 $22.00 $20.00 $18.00 $16.00 $14.00 $12.00 $10.00 Average Class III &Class IV Prices ($/CWT) Class IV Class III

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7 U.S. Dairy Commodities

8 Butter production in 2015 of 840k MT was down.5% vs (Growth in whole fat milk) Prices peaked at $6355/MT in Nov 2015, now at $4515/MT. Total U.S. Butter Production Strong domestic consumption. Butter exports down 71% v (000 MT) 2,000,000 1,900,000 1,800,000 1,700,000 1,600,000 1,500,000 1,400,000 1,300,000 1,200,000 1,100,000 1,000,000

9 Butter Prices $7,000 NASS/AMS Butter Prices $/MT $6,000 $5,000 $4,000 $3,000 $2,000

10 Total U.S. NFDM/SMP Production (000 MT) Milk powder production in 2015 of 1,032k MT was down 1.6% vs WMP production in 2015 of nearly 50k MT was up 5% over SMP/NFDM exports up 3% over ,100 1,050 1,

11 U.S. NFDM/SMP Production 1 st Quarter First quarter 2016 production of dry milk powder is down 5.6% over March Nonfat Dry Milk stocks are 7.5% below previous year. Weak prices due to global oversupply Q1 NFDM/SMP Production (000 MT)

12 U.S. Nonfat Dry Milk prices peaked at $4625/MT in 2014 and have continued to decline since now at $1650/MT $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0

13 Total U.S. Cheese Production Total U.S. cheese production of 5.4 million MT in 2015, with Mozzarella and Cheddar the dominant products, accounting for 2/3 of production. Cheese production growth in 2015 was 3.40% compared to the 10 year CAGR of 2.94%. 5,500 5,000 4,500 4,000 3,500 U.S. Cheese Production (000 MT)

14 U.S. Cheese Production 1 st Quarter Cheese production is up 3% in Q1 vs. prior year. April cheese stocks at record levels 552k MT (larger than any month in 32 years), 12% above last year putting downward pressure on prices. Cheese exports down 14% from ,400 1,300 1,200 1,100 1,000 Q1 U.S. Cheese Production (000 MT)

15 U.S. Cheese Prices Stable in Q1 - now in decline (CME spot price now at $2900/MT) $5, $5, $4, $4, $3, $3, $2, $2, U.S. Cheddar Cheese Prices $/MT

16 U.S. Whey & Lactose - Production & Market Data

17 2015 U.S. Whey-based Ingredients Production Total 1.38 Million MT WPI & Other Protein Fractions WPC80 3% 7% Modified Whey 4% Concentrated Whey 2% Dry Whey 25% WPC35 6% Permeate 26% Lactose 27%

18 Total U.S. Dry Whey Production Dry whey production increased for the first times since production of 445.6k MT was up 12.7% from Stock levels only slightly above seasonal norms. Prices dropped 70% from their 2014 high of $1450/MT down to a low of $450. Showing some signs of recovery in 2016 ($522/MT in April) (000 MT)

19 Dry Whey Stocks Metric Tons 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

20 U.S. Dollars / metric ton Whey Powder Pricing $1,700 $1,500 $1,300 $1,100 $900 $700 $500 $300 Jan-11 Jan-12 Jan-13 Jan-14 Jan-14 Jan-14

21 U.S. Whey Powder Domestic Utilization in Food 2014 All Other Uses 17.9% Baking Industry 4.1% Dairy Industry 39.5% Nutraceuticals, Pharmaceuticals, Special Dietary Use 14.9% Prepared Dry Mixes & Dry Blends 23.6%

22 Total U.S. WPC Production WPC production of 224k MT in 2015 was down from the previous year (-8.3%)for the first time since Production of higher protein (> 50%) WPC was up 7.7% over the previous year to 124k MT; while lower protein WPC declined 23% from 2014 to 100k MT (less than high protein WPC for the first time). Per pound of protein production was still down 2.5% vs Stocks levels are down 17% from last year, and down 38% from February peak. WPC 34 prices peaked in Q at $3900/MT and bottomed out at $1166/MT in Dec2015. Starting to show some signs of recovery. (000 MT) Total % > 50%

23 WPC Stocks Metric Tons 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

24 U.S. Dollars / metric ton WPC-34 Pricing $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

25 U.S. WPC34 Domestic Utilization in Food 2014 All Other Uses 24.0% Infant Formulas 29.1% Baking Industry 11.1% Dairy Industry 15.6% Mainstream Nutrition 20.2%

26 U.S. WPC80 Domestic Utilization in Food 2014 Mainstream Nutrition 3.6% All Other Uses 14.3% Prepared Dry Mixes & Dry Blends 4.9% Sports Powders 20.7% Sports Bars 56.5%

27 Total U.S. Lactose Production (000 MT) Lactose production was down 6.98% in 2015 over prior year to 479,150 MT. No change in production in Q1 of 2016 vs. Q Corrected stock levels for March 2016 were down 14% vs previous year and April stocks held steady. Prices bottomed out at $407/MT in Q4 of 2015 and are up 30% so far in 2016 to $530/MT (April)

28 Lactose Stocks Metric Tons 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

29 U.S. Dollars / metric tons Lactose Pricing $2,050 $1,850 $1,650 $1,450 $1,250 $1,050 $850 $650 $450 $250 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

30 U.S. Lactose Domestic Utilization in Food 2014 Institutional Use 5.1% All Other Uses 18.8% Confectionery Industry 39.5% Nutraceuticals, Pharmaceuticals, Special Dietary Use 9.3% Infant Formulas 27.3%

31 Dairy Permeate Powder (MT) U.S. is largest producer globally. Up to 50% of production is exported. Includes both whey permeate (85% of total) and milk permeate Production and prices are not reported in the U.S. Est. approximately 1/3 of U.S. permeate not being processed While still primarily sold into feed market, food applications are growing 500, , , , , , , , ,000 50,000 0 Estimated US Production of Dairy Permeate

32 U.S. Whey Permeate Domestic Utilization in Food 2014 Beverage Manufacturers 4.6% All Other Uses 1.0% Dairy Industry 52.1% Prepared Dry Mixes & Dry Blends 42.3%

33 Total U.S. WPI Production (MT) WPI production for 2015 up 20.5% over 2014 at 44,547 MT. Production in Q up 12% vs. the prior year. Stock levels have been building, with current inventory up 34% vs previous year. Prices are not reported in the U.S. 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0

34 U.S. Whey Protein Isolate Domestic Utilization in Food 2014 Sports Beverages 11.2% Prepared Dry Mixes & Dry Blends 1.1% All Other Uses 3.9% Sports Powders 14.0% Sports Bars 69.7%

35 Q1 Whey Product Production (000 MT) 140, , ,000 80,000 60,000 Q Q Q Q Q ,000 20,000 0 Dry Whey WPC Lactose WPI

36 U.S. Whey: Key Issues Whey powder production increased for first time in several years, driven by price vs. WPC/Lactose Overall WPC production is down although higher protein WPC still growing (and generating more permeate). Decrease in Lactose/Permeate (1 st time in 10 years) due to global oversupply/price more permeate going into liquid feed. Growth of permeate sales into the food sector Export markets continue to be extremely important accounting for 63% of whey products (down from 76% in 2014) and 75% of lactose (up from 67% in 2014) produced in Proposing a spot market for dry sweet whey at the CME to improve price discovery for whey products

37 U.S. Whey: Key Issues Supporting the development of a Codex Standard for Dairy Permeate Addressing threats from non-dairy alternatives to permeate/lactose for feeding piglets GMOs becoming more and more of an issue State of Vermont requiring labeling effective July 1. Congress still considering legislation to address the issue. FDA also considering new regulations to address what can be labeled as natural ADPI developing new industry standards for several new milk and whey-based ingredients: Colostrum powders Micellar Casein Whey Protein Phospholipid Concentrate Native Whey Protein

38 Overview of U.S. Dairy Exports

39 U.S. Trade Balance Total Milk Solids, % of U.S. Production 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% U.S. Dairy Trade Balance Imports Exports

40 000 MT Composition of U.S. Dairy Trade 2015 vs (volume - total milk solids) , % of U.S. production 1,657 14% of U.S. production SMP/NDM Cheese Whey Lactose Other Casein/MPC

41 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% -10% 0% -20% -30% -40% -50% -60% -70% -80% Volume (000 MT) U.S. Exports of Dairy Products -14% 5% 2015 vs % 3% Whey Lactose Cheese SMP/ NDM -8% Ice Cream 0% Milk & Cream -71% Butter -26% All Value *(000 liters) * 16.9 $5,362 mil. Source: USDEC

42 MT (000) All U.S. Whey Exports 63% of total U.S. production in

43 U.S. Exports of All Dry Whey - by Type (Volume) ,465 MT WPC, 22% Sweet Whey, 38% Milk Proteins, 6% WPI, 8% Modified Whey, 26% Source: USDEC

44 MT (000) U.S. Lactose Exports 75.3% of total U.S. production in

45 Summary: U.S. Dairy Sector Milk production continues to grow although at a slower pace Cheese/Whey production utilizing a growing share of the milk supply Global oversupply of dairy commodities is beginning to be reflected in U.S. prices (butter being the only exception) Poor returns for dairy farmers MPP not giving much relief - California petitioning for a Federal Milk Market Order Export volumes down due to stronger domestic demand & dollar