• Twitter
  • Faceboook
  • Youtube
  • Email
  • Google Plus
Search sponsored by EastOregonMarketplace.com
Home  »  Ag Sectors

Prices slide as milk flows

Print Print

Industry depends 'on global markets to clear our market'


By CAROL RYAN DUMAS


Capital Press


Excess supplies of milk are leading to price softening in the U.S. and international dairy markets, and rising product inventories are expected to keep downward pressure on those markets.


International prices are down 20 to 30 percent from their peak in spring 2011, according to the U.S. Dairy Export Council.


While demand for dairy products has remained solid, near-perfect weather and attractive farm gate prices have raised milk production more than 3 percent in the five leading dairy-exporting countries.


"Anytime we are softening it's a concern," said Alan Levitt, vice president of communications for USDEC. "We depend on global markets to clear our market."


Prices have gradually declined over the past year, making 2012 a challenging year for dairymen.


Demand has been solid in multiple regions around the world. But Levitt said as buyers have seen milk supplies expand they have become more reluctant to buy ahead, backing up supplies even further.


"The psychology changes, and the soft market sentiment feeds on itself," he said.


The Oceania cheddar cheese price was the only price that didn't move lower last week in the USDA survey of prices. Most other prices were $100 to $200 per metric ton lower, Jerry Dryer reported in his May 11 Dairy and Food Market Analyst.


USDA's Agricultural Marketing Service reported that for the week ending May 11, the Oceania price for cheese was generally holding steady. The butter price was down 13.6 percent, skim milk powder was down 4.6, and whole milk powder was down 2.2 percent.


Dryer expects the U.S. floor price for butter to hit $1.30 per pound and $1.05 for nonfat dry milk. But he also thinks U.S. milk production has reached its seasonal peak.


More than half of the U.S. new milk production over the last few years is going into exports, and the U.S. needs to maintain that volume so production doesn't back up into domestic markets, Levitt said.


So far, demand is holding, with exports averaging about 13 percent of U.S. production. That wasn't the case in early 2009, when dairy markets crashed. Exports were nearing 13 percent of production in fall 2008, but dropped to 8 percent in early 2009, Levitt said.


"We lost 5 (percentage points) that now wasn't going overseas. It backed up on the domestic market and is probably why the markets crashed," he said.


A healthy range for U.S. dairy exports is between 12 and 15 percent of production. Dropping back to 8 or 9 percent would be ugly, he said.


Demand in the first quarter was 13.2 percent, compared with 12.9 percent in the first quarter of 2011. Exports of cheese, high-end whey products, lactose, and nonfat dry and skim milk powder were all higher in the first quarter, butterfat exports were down 34 percent.


It's particularly important that nonfat dry and skim milk powder exports stay up as the U.S. produces twice as much of those products as the amount used domestically. Exports of those products were 44 percent of production in the first quarter, Levitt said.


"We're pushing that level. That might be the first inflection point where we could run into some trouble," he said.






U.S. Exports as percent of production


Product March '12 vs. March 2011 1st Quarter vs. year ago


NDM/SMP 43% 49% 44% 53%


Cheese 5.8% 5.4% 5.3% 5.2%


Butterfat 7.2% 11.2% 5.2% 8.6%


Dry & wet whey 46% 56% 46% 52%


Lactose 72% 61% 68% 66%


Total milk solids 13.6% 13.4% 12.9% 13.2%




U.S. cash prices (week ending May 11 vs. week earlier)


Cheese (per pound)


Block -3.5 cents


Barrel -2.0 cents


Butter 1 cent


Nonfat Dry Milk -2.5 cents


Federal orders (per hundredweight)


Class I -13 cents


Class II -39 cents


Class III no change


Class IV -55 cents


Calif. 4b -24 cents


Calif. 4a -61 cents




Print Print

User Comments

blog comments powered by Disqus