Thursday, October 18, 2018
 US Exports Are A Bright Spot In 2014 Dairy Outlook  

Dairy economists are pointing to exports as the brightest spot  in the 2014 dairy outlook—with good reason:

- U.S. dairy exports in 2013 not only will mark a fourth consecutive record year but a new, high watermark for the ninth time in 10 years. By year’s end, U.S. dairy exports will have risen nearly 30% in value over 2012 levels to $6.6 billion, says Alan Levitt with the U.S. Dairy Export Council. In volume, exports will have climbed by about 18% to 3.9 billion pounds of milk solids.

- U.S. dairy exports are on track to account for an impressive 15.4% of the nation’s 2013 milk output. That’s by far a record and compares to the recent normal of 13%. In July and August, exports captured an unprecedented 17.5% of U.S. milk production. "Five years ago, we exported just 5% of our milk production," Levitt says. "That means we’ve found new markets for 10% of our milk."

Adding to 2014’s export-driven optimism are dairies’ improving margins, fueled by this year’s strong milk prices and the recent decline in feed costs.

U.S. dairy producers have just witnessed the second-highest year ever for milk prices. The All-Milk price averaged $19.89 per cwt. for the first 10 months of 2013. Only 2011 saw a higher yearly average—$20.14 per cwt.

"Income over feed costs in the months ahead looks to be the best since 2007," Levitt says. Improved dairy margins are largely due to the decline of corn prices, which have dropped 41% to about $4.50 per bushel, down from August 2012’s high of $7.63. "Corn prices are at their lowest prices in three years and could go lower," says Joel Karlin, market analyst for California-based Western Milling.

In addition to sluggish domestic dairy consumption and high product inventories, milk production is forecast to surge as dairies seek to boost profits. That’s expected to pressure milk prices lower.

"Milk prices won’t collapse, but they may drop to $16.70 per cwt. by February," says Robert Cropp, professor emeritus at the University of Wisconsin-Madison and a well-known dairy marketing specialist.

Jerry Dryer, editor of the Dairy & Food Market Analyst newsletter, expects Class III prices to dip to $16 per cwt. in the third quarter of 2014 before rising to $16.75 per cwt. in the fourth quarter.

He is also watching Class IV prices, which represent dairy powder products. With strong overseas demand for skim milk and whole milk powder—and Dairy Farmers of America’s new powder plant in Nevada coming online—there is Class IV strength ahead. "Class IV prices are going to get the lift," he says.

The U.S. won’t be the only major milk producer to ramp up milk production. Global players New Zealand and the European Union (EU) will be back in competition after 2013’s weather setbacks. Typically, the two regions each account for 30% to 35% of the world’s dairy exports. The drought that constricted New Zealand’s milk output and exports this year has abated. The weather conditions that hampered EU milk production have also improved, raising prospects for greater milk supplies in the coming months. Their recovery could slow U.S. exports, Cropp says.

Levitt, however, thinks 2013’s tight global milk supplies mean supply pipelines need to be filled. "Production will come back," he predicts, "but it will be absorbed by pent-up demand."

Since 2005, U.S. milk production has increased 13%, a gain of 26 billion pounds. "That growth has been enabled by expanding export markets," Levitt adds. "More than half of the ‘new’ milk produced by U.S. dairy farmers has been turned into a product sold overseas. Exports have been a clear path to growth for U.S. dairy farmers."

Source: Ag Web


Posted on Wednesday, November 27, 2013 (Archive on Wednesday, December 04, 2013)
Posted by  Contributed by