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USDEC: Expect dairy export prices to increase in 2013


By CAROL RYAN DUMAS



Capital Press



Economic uncertainty has challenged exports this year, but the U.S. Dairy Export Council expects global dairy prices to increase in 2013.



Flat milk production and low producer margins that will constrain production further is expected to lead to higher product and milk prices in 2013, USDEC officials said in a webinar today.



Economic uncertainty and sluggish economies have made it difficult for buyers of dairy products to pass on higher prices to consumers. But a lack of milk supply to meet product demand in 2013 will have buyers competing for supply and bidding up prices, said Alan Levitt, USDEC vice president of communications and market analysis.



The global dairy market feels like it's satisfied, even a little complacent, but there is an expectation that a shortage is coming. Buyers are covered for the first quarter of 2013, but they'll soon have to get back in the market for second quarter needs, he said.



With two years of tremendous growth in world milk supply, dairy product prices in general started declining in the middle of 2011 and bottomed out to three-year lows this summer. They rebounded about 20 percent in the third quarter and have held steady the last six to eight weeks, he said.



But USDEC expects world dairy prices to be up 10 to 15 percent over 2012, due to an undersupply of milk, he said.



Slower milk supply growth among major exporters will limit growth in exportable supply below recent trends, moving prices higher, said Marc Beck, USDEC executive vice president of strategy and insights.



Export growth for whole milk powder is slowing in New Zealand and Argentina, and the European Union's growth in skim milk powder is slowing. Global shortfalls are expected in both products in 2013, with a shortfall of about 54,000 metric tons in whole milk powder and 40,000 to 110,000 metric tons of skim milk powder, he said.



Recession in the EU and sluggish U.S. economic growth could also slow growth of domestic cheese consumption, facilitating export growth, he said



With those factors in play, USDEC is expecting increased export opportunities and higher prices for U.S. exporters. International consumers, especially those in Asia, are willing to pay more for dairy products than U.S. consumers, he said.



The challenge for the U.S. will be balancing the needs of the international market with the needs of the domestic market, in particular for skim milk powder, which is used in the U.S. to fortify cheese. The U.S. market is driven by cheese but there could be a point at which U.S. powder is worth more to an international skim milk powder buyer than to a domestic cheese plant, he said.



Stocks of milk powder in the U.S. and the EU have been dwindling over the past several years due to demand and the risks of holding inventory and are down more than half what they were in 2011, Levitt said.



Manufacturers are going to have to make strategic adjustments, he said.



U.S. dairy export volumes have been lower since May but still above a year ago. USDEC expects those volumes in 2013 to be fairly close to 2012, he said.








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