MilkSA Economies & Markets Presentation
The presentation covers the international and SA economic situations, global economic growth projections, inflation trends, and US Fed rates. It analyzes the impact of external shocks on the world economy and provides insights into the future economic outlook.
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MilkSA Project: Economies and Markets Presentation for the Milk SA General Meeting of Members 30 November 2022 Prepared by B van Heerden and assisted by the MSA Industry Information Work Group November 2022
International economy International dairy situation SA economic situation SA dairy situation
World economy has been shaken by four once World economy has been shaken by four once- -in in- -a a- -century external shocks in the space of two years: shocks in the space of two years: Worst pandemic in 100 years, Worst pandemic in 100 years, First major war in Europe in 75 years, First major war in Europe in 75 years, Massive monetary stimulus, Massive monetary stimulus, (Countering the Cost (Countering the Cost- -of The complexity of supply chains within globalization. The complexity of supply chains within globalization. century external of- -living crisis) living crisis) Major increase in uncertainty over a broad base of variables Major increase in uncertainty over a broad base of variables . .
Global economic growth and expected growth 2010 2023 % GDP growth 10 8 6 4 2 0 -2 -4 -6 -8 2010 5.1 2011 3.9 2012 3.5 2013 3.4 2014 3.4 2015 3.4 2016 3.2 2017 3.8 2018 3.6 2019 2.8 2020 -3.1 2021 6 2022** 3.2 2023** 2.7 World Advanced economies Developing economies South Africa 3 1.7 1.4 1.4 1.8 2.1 1.7 2.4 2.2 1.6 -4.5 5.2 2.4 1.1 7.4 6.2 5.1 5 4.6 4.3 4.4 4.7 4.5 3.6 -2 6.6 3.7 3.7 2.9 3.5 2.5 2.2 1.5 1.3 0.6 1.3 0.8 0.2 -6.4 4.9 2.1 1.1 Source: IMF WEO October 2022 ** Projection
Global inflation from 2000 to 2024 10 9 8 7 6 Percentage 5 Global inflation 4 3 2 1 0 Month Source: World bank (* projections)
US Fed target rate from 2000 to Nov 2022 and the US inflation rate to Oct 2022 9 8 7 6 Percentage 5 US Inflation rate US Fed rate 4 3 2 1 0 Years Source: Bloomberg markets
Us monthly Fed rate from Jan 2021 to November 2022 and the US inflation rate to Oct 2022 10 9 8 7 Percentage 6 5 US monthly inflation 4 US Monthly Fed rate 3 2 1 0 Nov-21 Nov-22 Aug-21 Aug-22 Jun-21 Jun-22 May-21 May-22 Apr-21 Apr-22 Dec-21 Jan-22 Jan-21 Feb-21 Sep-21 Feb-22 Sep-22 Jul-22 Jul-21 Mar-21 Mar-22 Oct-21 Oct-22 Month Source: Bloomberg markets
FAO food price indices Jan 2012 Oct 2022 Index (2014 - 2016 = 100) 175.0 150.0 125.0 100.0 75.0 50.0 Food Meat Dairy Cereals Sugar Source: FAO, November 2022
International economy International dairy situation SA economic situation SA dairy situation
International prices of dairy products Jan 2012 October 2022 Rand/ton US$/ton Rand per ton US$ per ton 105 000 95 000 6 400 85 000 5 400 75 000 65 000 4 400 55 000 3 400 45 000 35 000 2 400 25 000 1 400 15 000 Butter SMP Cheddar FMP SMP Cheddar FMP Butter Source: USDA, South African Reserve Bank
GlobalDairytrade Auction Sale price index of dairy products, Jan 2011 November 2022 Index 1,600 1,500 1,400 1,300 1,200 1,100 1,000 ,900 ,800 ,700 ,600 ,500 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 GDT Price Index Source: GDT Index
Average European, Poland and SA producer prices, of unprocessed milk, Jan 2019 Oct 2022 10.40 9.40 8.40 Rand per Litre 7.40 6.40 5.40 4.40 3.40 Feb-19 Apr-19 Feb-20 Apr-20 Feb-21 Apr-21 Feb-22 Apr-22 Oct-20 Sep-22 Oct-19 Oct-21 Oct-22 Sep-19 Sep-20 Sep-21 Jun-19 Jun-20 Jun-21 Jun-22 Jul-19 Jul-20 Jul-21 Jul-22 Nov-19 Nov-20 Nov-21 Mar-20 Mar-21 Mar-22 Jan-19 Mar-19 May-19 Jan-20 May-20 Jan-21 May-21 Jan-22 May-22 Dec-19 Dec-20 Dec-21 Aug-19 Aug-20 Aug-21 Aug-22 Monthly average price ZA average EU average Poland average Source: European Commission (Oct 2022 estimate)
International economy International dairy situation SA economic situation SA dairy situation
Annual SA economic growth ( non-annualized) 2018 2022 (base year 2015) Non-Annualized quarter on quarter % change 20 13.8 10 2.7 1.7 1.4 1.4 1.1 0.8 0.4 0.4 0.3 0.1 0 0 0 -0.1 -0.7 -0.9 -1.8 -10 -17.1 -20 18-1 18-3 19-1 19-3 20-1 20-3 21-1 21-3 22-1 Source: Stats SA
Consumer price inflation Jan 2010 Oct 2022 CPI change % CPI Index (2000 = 100) 350 14% 300 12% 250 10% 200 8% 150 6% 100 4% 50 2% 0 Jan-10 0% Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Consumer price index (Headline) (Left axis) CPI change % (right axis) Source: Stats SA
Consumer price inflation Jan 2021 April 2022 Us monthly Fed rate from Jan 2021 to November 2022 and the monthly SA Reserve Bank rate to Nov 2022 8 Differential 350 basis points 7 Differential 225 basis points 6 5 Percentage 4 US Monthly Fed rate 3 SA Reserve Bank rate 2 1 0 Nov-21 Nov-22 Jun-22 Aug-21 Aug-22 Jun-21 May-21 May-22 Apr-21 Apr-22 Dec-21 Jan-21 Jan-22 Sep-21 Sep-22 Feb-21 Feb-22 Jul-21 Jul-22 Mar-21 Mar-22 Oct-21 Oct-22 Month Source: Us Federal Reserve and the SA Reserve Bank
Prime interest rate, real interest rate and inflation rate in South Africa Jan 2010 Oct 2022 12 10 8 6 4 2 0 Jan-21 Jan-22 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 May-10 May-11 May-12 May-13 May-14 May-15 May-16 May-17 May-18 May-19 May-20 May-21 May-22 Prima rate Real rate Inflation rate Source: SARB
SA households: real disposable income and debt as % 1982 2021 100.00 55000 % Rand 50000 90.00 45000 80.00 40000 70.00 35000 60.00 30000 50.00 25000 40.00 20000 1983 1986 1989 1992 1995 1998 2001 2004 2006 2007 2009 2012 2015 2018 2021 1982 1984 1985 1987 1988 1990 1991 1993 1994 1996 1997 1999 2000 2002 2003 2005 2008 2010 2011 2013 2014 2016 2017 2019 2020 Debt % of disposable income (Left axis) Real per capita disposable income (R) (constant 2015 prices) ( Right axis) Source: SARB
International economy International dairy situation SA economic situation SA dairy situation
Monthly unprocessed milk purchases Jan 2019 Oct 2022 (table percentage change per year) Year Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 000 Ton 000 Ton 2 712 2 843 2 906 2 983 (2.65%) 3 173 (6.37%) 3 158 (-0.45%) 3 254 (3.02%) 3 411 (4.82%) 3 433 (0.65%) 3 427 (-0.16%) 3 403 (-0.71%) '000 Tonnes 340 320 300 2022* 2019 280 2020 2021 2022 260 240 220 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Milk SA; Sep and Oct preliminary
Calculated milk: maize plus soybean price ratio Jan 2019 Oct 2022 Milk : feed price ratio 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80 Jan 1.15 1.14 1.04 1.23 Feb 1.13 1.20 1.06 1.36 Mar 1.12 1.24 1.20 1.38 Apr 1.14 1.29 1.30 1.43 May 1.09 1.40 1.34 1.39 Jun 1.12 1.39 1.39 1.29 Jul 1.21 1.31 1.32 1.28 Aug 1.16 1.22 1.24 1.22 Sep 1.08 1.12 1.24 1.21 Oct 1.00 1.04 1.23 1.15 Nov Dec 2022 2020 2021 2019 1.04 1.21 1.17 1.06 1.13 1.17 2022 2020 2021 2019 Source: MPO calculations; Feed price = 70% YM1, 30% Soy, Safex nearest month prices, Producer price MPO survey (Oct preliminary)
Milk utilization in liquid products: 2021 Source: Milk SA
Milk utilization in concentrated products: 2021 Source: Milk SA
CHANGES IN THE QUANTITIES OF RETAIL SALES OF SPECIFIC DAIRY PRODUCTS CHANGES IN THE QUANTITIES OF RETAIL SALES OF SPECIFIC DAIRY PRODUCTS Sales in the 3 months from July 2022 to September 2022 versus the sales in the 3 months from July 2021 to September 2021 Sales in the 6 months from April 2022 to September 2022 versus the sales in the 6 months from April 2021 to September 2021 Sales in the 9 months from January 2022 to September 2022 versus the sales in the 9 months from January 2021 to September 2021 Sales in the 12 months from October 2021 to September 2022 versus the sales in the 12 months from October 2020 to September 2021 Sales in the month of September 2022 versus the sales in the month of September 2021 PRODUCT percent -3.9 0.1 -1.2 -6.1 -1.8 percent -7.6 -1.1 -2.7 -2.9 1.3 percent -8.0 0.2 -3.7 -4.2 0.6 -5.7 -5.2 -0.6 -3.6 3.4 -8.4 -0.5 -3.8 -3.1 1.3 Fresh Milk UHT milk Flavoured milk Yoghurt Maas 2.1 1.6 0.6 1.2 1.5 Pre-packaged cheese -9.0 -4.9 -6.9 -5.8 -10.1 -7.0 -3.2 -3.7 -6.2 -3.1 -2.9 -7.0 -2.8 -1.7 -5.9 Cream cheese Butter Cream Source: SAMPRO based on NielsenIQ September 2022 report
Changes in average retail prices of specific dairy products Changes in average retail prices of specific dairy products September 2022 versus August 2022 September 2022 versus June 2022 September 2022 versus March 2022 September 2022 versus December 2021 September 2022 versus September 2021 September 2022 versus March 2021 September 2022 versus September 2020 PRODUCT (1 month ago) (3 months ago) (6 months ago) (18 months ago) (9 months ago) (24 months ago) (12 months ago) Percent 5.1 9.3 8.9 8.6 10.0 Percent -0.014 1.0 1.7 1.0 1.7 Percent 2.6 2.7 4.4 8.3 6.8 Percent 5.1 11.3 10.7 7.5 8.9 Percent 6.5 9.8 13.0 9.6 8.8 Percent 9.0 13.6 19.5 12.9 10.6 Percent 13.5 13.2 20.4 16.0 15.6 FRESH MILK UHT MILK FLAVOURED MILK YOGHURT MAAS PRE-PACKAGED CHEESE -2.0 2.4 7.5 4.2 5.7 9.9 11.3 0.7 -2.6 0.6 2.6 4.6 3.8 6.6 7.6 6.6 5.8 7.3 5.9 8.4 7.4 8.9 9.7 8.4 12.6 18.2 5.9 14.0 CREAM CHEESE BUTTER CREAM Source: SAMPRO based on NielsenIQ September 2022 report
Producer, processor and retail price indices, Jan 2012 October 2022 Index (2012 = 100) 190.0 170.0 150.0 Dairy products PPI (fresh milk, UHT, cheddar, yoghurt) Unprocessed milk PPI 130.0 Milk, cheese & eggs, CPI 110.0 90.0 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Source: Stats SA
The dairy market is struggling to find the right balance between The dairy market is struggling to find the right balance between supply and demand due to the: supply and demand due to the: Very high levels of uncertainty in South Africa and internationally, Very high levels of uncertainty in South Africa and internationally, due to initially Covid and now the disruption created by the Russian due to initially Covid and now the disruption created by the Russian invasion and the reaction of other countries to it; invasion and the reaction of other countries to it; Consumer and industrial demand is undermined in the current high Consumer and industrial demand is undermined in the current high inflationary environment and the weak economy, and inflationary environment and the weak economy, and Role players in the value chain need to approach the dynamic Role players in the value chain need to approach the dynamic between supply and demand with caution, as the present situation between supply and demand with caution, as the present situation is very different from the past and further developments should be is very different from the past and further developments should be closely monitored and reacted to. closely monitored and reacted to.
