Dairy Market: Newlat – The White Knight? Market Analysis from 3-5-24
Milk fat and spot milk prices rising; protein concentrates, cheese, and skimmed milk powder stable, feed costs declining.
Last week, it seemed as if prices were caught in a maelstrom, relentlessly pulled downward. However, this week a silver lining has emerged: Prices have steadied, finding new support. Particularly, the spot milk price is gradually climbing out of its abyss, distancing itself from its previous lows. Nonetheless, at a modest €0.32 per litre, some dairies continue to hover on the brink of viability, ensnared in a web of financial pressures.
Southern Europe is witnessing a disquieting slump: The demand for Cagliata has plummeted dramatically. The sole villain identified in this misery are the aggressive price reductions for Mozzarella. The year 2023 will be remembered as the time when Mozzarella production capacities in Europe ballooned. Consequently, margins shrunk and medium to small producers, who traditionally worked with Cagliata, lost market share. The question remains whether margins for Cagliata will also melt away or whether we will witness a structural transformation.
And what about Switzerland?
A great sigh of relief sweeps through Switzerland: The Italian company NEWLAT has acquired a 10% stake in the Hochdorf Group, the fourth-largest dairy in the country. This development could inject fresh energy into the sector and promise stability.
Adding to this fortunate turn of events is the cold, wet weather which, in April, led to a decrease in milk production. This reduction in supply has contributed to some easing of tensions on the dairy market.
The Question: Newlat – The White Knight?
So far, NEWLAT has not elaborated on its intentions, yet it's confirmed that the company will nominate a candidate for the Board of Directors at the upcoming General Meeting. Essentially, there are two strategic directions that NEWLAT could take:
- The objective could be to rehabilitate Hochdorf Group and continue to run it as an entire entity.
- The alternative might be to break up the company and sell off the individual business units separately.
It's presumed that NEWLAT would first want to gain deeper insights into Hochdorf's financial data and business situation as part of the Board, to then base a well-founded strategic decision on this information.
Our forecast for Q2 and Q3:
Even though the demand for Cagliata in the south remains unsatisfactory, prices are only experiencing a slight decrease. This suggests that the market is in equilibrium. Nevertheless, some dairies have slipped into the red in April and May. We therefore assume that they will attempt to implement price increases. Based on this, we continue to anticipate a rise in prices in the third quarter. However, should the dairies fail to achieve higher prices on the market, an accelerated structural change in the dairy industry could be likely.
We will be showcasing at the following expos:
• Cibus Parma, from 7 to 10 May 2024
• PLMA Amsterdam, on 28 and 29 May 2024
• Summer Fancy Food New York, from 23 to 24 June 2024, in partnership with World's Best Cheese
• International Cheese Award, on 27 June 2024
• Sial Paris, from 19 to 23 October 2024, where we'll have our own booth
• Marca Bologna, from 15 to 16 January 2025
• Winter Fancy Food Show Las Vegas, from 19 to 21 January 2025, along with World's Best Cheese
• Sirha Lyon, from 23 to 27 January 2025
• Le Mondial du Fromage et des Produits Laitiers in Tours (France), from 14 to 16 September 2025
Best Wishes, Affineur Walo
