Higher EU Retail Cheese Demand Won’t Compensate For Food Service Losses

The increasing European Union (EU) demand for cheese in retail and industry (e.g., ready meals) is not expected to compensate for food service losses, according to the short-term EU agricultural outlook report released Monday by the European Commission.

This could result in an overall lower cheese consumption (down 0.4 percent) in the EU, the report said.

Despite cheese exports that could grow (up 2 percent) thanks to increasing shipments to Japan and also to the UK, the domestic consumption decline could lead to lower production growth than previously anticipated (up 0.3 percent) and stock levels could also increase by 30,000 tons (66.2 million pounds) by the end of 2020, the report said.

Over the spring, favorable rains improved grass productivity in some EU countries. Also, low feed prices allowed using more purchased feed.

This, plus the extra day in February, contributed to a 2.3 percent growth of the EU milk collection in the January-April 2020 period. Italy contributed the most to this growth, followed by Germany and the Netherlands.
EU milk collection this year could grow by 0.7 percent (more than anticipated in the spring outlook), up to close to 144 million tons. A good yield growth (up 1.3 percent) driven by good quality pastures and an increased use of compound feed could more than compensate for the dairy herd decline (down 0.6 percent).

Compared to 2019, EU milk collection growth is expected to slow down in the second quarter of 2020 and to decline in both the third and fourth quarters.

Germany is expected to contribute the most to EU milk production growth this year (18 percent), followed closely by Italy, Spain and the Netherlands. Further increases are expected in Ireland, Denmark and Poland. By contrast, production is expected to remain stable in France.

Due to lower growth rates in EU countries of higher milk solids content (for example, Ireland), milkfat content is expected to decline slightly (down 0.2 percent, compared to strong growth last year), whereas milk protein content should remain stable. Despite this, milkfat and protein availabilities should grow (up 0.5 percent and up 0.7 percent, respectively), due to a stronger growth in milk deliveries.

The decline in the EU skim milk powder price, which accelerated with the coronavirus outbreak in the EU in March, was reversed in April. At the beginning of June, it was close to 2,200 euros per ton, up 6 percent compared to the same week in 2019, 28 percent above the intervention price. With such prices, the EU remains competitive on the global market, the report noted.

The EU butter price reached its lowest level in early May and has increased since then. At the beginning of June, it had reached almost 3,100 euros per ton (23 percent below last year) and remained well above the intervention price. Currently, according to the report, the EU is the most competitive actor on the market, with a price difference of more than $300 per ton with Oceania and $700 per ton with the US.

Despite weakened food service demand, cheese prices were stable, at around 3,000 euros per ton.

In May, the EU whole milk price also bounced back, reaching close to 2,700 euros per ton in early June. This price is “very competitive” on the world market, being very close to the Oceania price, the report noted.
The decline in ...

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