Dairy Market Outlook: WMP and AMF Prices in Focus Amid Global Shifts
Source: DairyNews.today
The global dairy market faces growing uncertainty as Whole Milk Powder (WMP) and Anhydrous Milk Fat (AMF) prices appear poised for significant movements. Rising milk production in New Zealand, volatile demand from China, and declining milk fat in Germany are shaping market dynamics, raising questions about which commodity will experience a pricing shift first.
New Zealand Milk Output Moderates
New Zealand’s October milk collections rose 2.8% year-over-year, aligning with seasonal averages but slowing from earlier surges in August and September. Cold snaps and heavy rain in the South dampened gains, with Fonterra reporting a 2.5% increase in output. Non-Fonterra processors saw a higher 3.8% growth, potentially reflecting market share shifts as some farms transition suppliers.
Analysts project November milk production growth to ease to 1.5% year-over-year, bringing the month’s total to approximately 242 million kgMS. Soil moisture levels across the country remain stable, mitigating concerns of dryness affecting output.
China Drives WMP Demand Amid Mixed Signals
Chinese buyers have sustained robust WMP demand, with North Asia registering its highest purchasing volumes since early 2022 during the recent Global Dairy Trade (GDT) auctions. This trend comes despite bearish sentiment tied to low domestic milk prices in China. Analysts suggest government policies promoting local milk production could sustain growth despite market pressures.
Algeria’s purchase of 25,000 tonnes of WMP for early 2025 delivery at premium prices further underscores demand strength. However, with strong New Zealand production, WMP prices may face downward pressure in coming months, particularly if the WMP stream overtakes SMP/fat profitability.
AMF Market Faces Potential Disruption
New Zealand’s AMF market, heavily reliant on Mexico for exports, faces risks from potential U.S. tariffs on Mexican imports. AMF flows into Mexico, which account for 10% of New Zealand’s production, are processed and re-exported to the U.S. If tariffs materialize, AMF pricing could weaken further, sustaining its discount relative to butter in global markets.
Fonterra’s recent increase in AMF offer volumes on the GDT platform has raised concerns about potential oversupply, adding to market uncertainty.
Germany’s Milk Fat Decline Pressures Butter Prices
In Europe, Germany’s milk collections have declined for 15 consecutive weeks, reflecting broader trends in reduced herd sizes and milk fat content. German butter production is forecast to drop by 13,500 tonnes this year, driven by lower fat yields and reduced dairy herd numbers.
Seasonal demand for butter, particularly ahead of the Christmas baking season, has failed to offset weakening cream markets. EEX January butter futures are already down EUR 500/tonne from their peak, and further price adjustments are expected as EU butter converges toward New Zealand’s lower pricing levels.
Global Market Implications
As dairy markets enter a period of heightened volatility, industry observers are closely monitoring developments in WMP and AMF streams. China’s demand for WMP and the European Union’s butter pricing trajectory could have cascading effects across global supply chains.
With production dynamics evolving in key regions, traders and processors remain cautious, positioning for potential disruptions in the months ahead.
New Zealand’s October milk collections rose 2.8% year-over-year, aligning with seasonal averages but slowing from earlier surges in August and September. Cold snaps and heavy rain in the South dampened gains, with Fonterra reporting a 2.5% increase in output. Non-Fonterra processors saw a higher 3.8% growth, potentially reflecting market share shifts as some farms transition suppliers.
Analysts project November milk production growth to ease to 1.5% year-over-year, bringing the month’s total to approximately 242 million kgMS. Soil moisture levels across the country remain stable, mitigating concerns of dryness affecting output.
China Drives WMP Demand Amid Mixed Signals
Chinese buyers have sustained robust WMP demand, with North Asia registering its highest purchasing volumes since early 2022 during the recent Global Dairy Trade (GDT) auctions. This trend comes despite bearish sentiment tied to low domestic milk prices in China. Analysts suggest government policies promoting local milk production could sustain growth despite market pressures.
Algeria’s purchase of 25,000 tonnes of WMP for early 2025 delivery at premium prices further underscores demand strength. However, with strong New Zealand production, WMP prices may face downward pressure in coming months, particularly if the WMP stream overtakes SMP/fat profitability.
AMF Market Faces Potential Disruption
New Zealand’s AMF market, heavily reliant on Mexico for exports, faces risks from potential U.S. tariffs on Mexican imports. AMF flows into Mexico, which account for 10% of New Zealand’s production, are processed and re-exported to the U.S. If tariffs materialize, AMF pricing could weaken further, sustaining its discount relative to butter in global markets.
Fonterra’s recent increase in AMF offer volumes on the GDT platform has raised concerns about potential oversupply, adding to market uncertainty.
Germany’s Milk Fat Decline Pressures Butter Prices
In Europe, Germany’s milk collections have declined for 15 consecutive weeks, reflecting broader trends in reduced herd sizes and milk fat content. German butter production is forecast to drop by 13,500 tonnes this year, driven by lower fat yields and reduced dairy herd numbers.
Seasonal demand for butter, particularly ahead of the Christmas baking season, has failed to offset weakening cream markets. EEX January butter futures are already down EUR 500/tonne from their peak, and further price adjustments are expected as EU butter converges toward New Zealand’s lower pricing levels.
Global Market Implications
As dairy markets enter a period of heightened volatility, industry observers are closely monitoring developments in WMP and AMF streams. China’s demand for WMP and the European Union’s butter pricing trajectory could have cascading effects across global supply chains.
With production dynamics evolving in key regions, traders and processors remain cautious, positioning for potential disruptions in the months ahead.
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