More balanced market could be on the horizon
|By Alan Levitt
The author is vice president of market analysis and communications with the U.S. Dairy Export Council.
The world dairy markets offer a bad-news/good-news story for U.S. dairy farmers.
The international milk powder markets plunged last summer to prices that hadn’t been seen in more than a decade. In addition, world prices for cheese, butter, and whey hit seven-year lows. However, strong domestic consumption insulated U.S. farmers from the world market slump more than any other export supplier.
In fact, it was farmers in New Zealand, Australia, and the European Union who “paid” to rebalance the world market after 2013 to 2014 excesses.
The markets finally recovered in the second half of 2016. This new year looks to be improved, with international prices closer to historic averages (except skim milk powder, which is expected to lag).
A reshaped U.S.
In the oversupplied, highly competitive world that emerged in the second half of 2014, U.S. exporters retreated. Our export volumes shifted into a lower gear — about 15 percent below our peak 2014 levels — after expanding steadily for more than a decade. We continue to push out nonfat dry milk/skim milk powder (NDM/SMP) and high-protein whey products, but we’ve lost sales of cheese and dry whey at the margins, while shipments of butterfat, whole milk powder (WMP), and milk protein concentrate (MPC) have fallen to negligible levels.