The year began with a strong milk supply but weak demand and is ending with a weak supply and stronger demand. Here is what has happened
- The government began buying surplus for the first time in 2 years; 276 Million pounds of milk powder were pulled from the Markets and put into Aide programs and the Dairy Export Incentive Program (DEIP). (Less Milk in the market)
- China started importing dairy again as their economy began to recover. New Zealand was able to move their inventories into the Chinese Market. (Less Milk In the World Market)
- Dairy Farmers were hurt by “below profit” prices losing an average of $5.00/cow per day and as the year progressed farmers were forced to cut back their herds. There were 226,000 cows removed from the nation’s dairy herds over the last 12 months. 2009 Milk production remained slightly above 2008 production until June when it began to taper off. August shows a .2% loss. (Less Milk in the Market)
- Drought also added to the loss in production. California, Arizona, New Mexico each showed numbers below last year. (Less Milk in the Market)
- Now that schools are back in session more fluid milk is packaged for schools and less fluid milk goes to driers. (Less Milk in the Market)
- New Zealand’s Spring production was off to a late start and they were unable to meet current demands; because of this Dairy America was able to move product into the International Market pulling nonfat out of inventories. (Less Milk in the Market)
All this combined equals a shortage of dairy powders and rising prices. It is difficult to find nonfat dry milk and WMP. Sodium and Calcium Caseinate, WPC80, WPC 34, and whey are very tight and prices continue to rise.
Currently we are hearing prices as high as $1.75/LB for HH and Caseinates are back up to as much as $3.50. AWPC 80 is up as high as $2.45 and whey and WPC 34 are both getting a premium $0.05/LB above market.
Going forward we should see a recovery in supply and with that an easing on prices. We are not certain where prices will settle but If demand remains as it is and production on the world market strengthens supply will be back within the next couple months.
If you would like a more detailed review of the markets please contact me direct at
Paul J. Knox
All American Dairy Products, Inc
610 640 7590 (ext 306)
Aug. 27 (Bloomberg) — Profits for U.S. farmers will plunge more than expected this year, dropping 38 percent from 2008 as the recession erodes demand for crops, livestock and dairy products, the government said. Read More:
USDA Announces Clarification on DPPSP – August 10, 2009. Read More:
The U.S. Secretary of Agriculture has committed to temporarily raise the price the federal Department of Agriculture will pay for dairy products, providing the director of the U.S. Office of Management and the Budget approves the move. Read More:
ESCALON, CA – A growing number of dairy farmers are selling their livestock at auctions. Read More:
ALL AMERICAN DAIRY PRODUCTS, INC.
We started the year with a down trending market as milk was over abundant, export dropped 50%, and recession kept domestic demand down. In the past few months we have seen some changes and the markets have begun to trend upward.
The markets have been rising and tightening up slowly. Reasons for the rise in the market are the forecast for a loss in production, and the uncertainty of the future. It is not that we are running short on inventory but Manufacturers are holding inventories because milk production for 2009 is expected to drop as much as 1.0%. This drop is a result of drought in California, farmers cutting herds because demand is down and feed costs are high (they are losing an average of $5.00/cow per day) and a late starting and poor Spring flush.
The loss in production will not be felt if the economy remains poor and milk demand remains low but as the economy turns, and we are seeing signs of that, then the demand for milk will increase and the loss in production could hurt. Keep in mind that the food industry is one of the first to recover from poor economic times. We will not see unemployment get better any time soon nor will we see the housing or auto industries recover anytime soon, but food will recover much sooner and the demand for milk will increase. It is still believed that if recession was removed from the mix there would not be enough milk to supply the world demand. The question is; how soon will the demand for milk increase? And will there be enough to cover the increase at that time?
We have already seen Chinas economy turn and as a result we have seen dairy inventories reduced in New Zealand, Europe and the USA. It has been reported that New Zealand’s inventories will be depleted by July based on contracts with China and although we still have Nonfat the whey markets were tightened up because China was buying whey from the USA.
There is no doubt that the future looks bright but there is no easy answer to the question of “how soon?” The future of our economy is driven by our past and navigated by educated guesses. My guess is that we will see a better 2010 as demand rises through 4th quarter 2009.
If you would like to discuss the markets in more detail, or discuss dairy powders in detail, please contact me direct at 610 640 7590 (ext 306)
Paul J. Knox
All American Dairy Products, Inc
CHICAGO (Reuters) – A new report based on a survey of small- to mid-sized U.S. manufacturers has found that 44 percent of the companies plan to begin hiring workers again as soon as next year if the economy rebounds as they expect. Read More
New Zealand Trade Minister Tim Groser says he will be making a case to have US dairy subsidies overturned when he meets trade and agriculture representatives at an international meeting in June. Read More
The Asian economies are likely to be the first to pull out of the global recession. Read More