January 20, 2012

 

With possible record-setting shipments of dairy exports for the US, the threat of an excessive inventory build-up may be reduced.

 

Data for November showing a 45% jump on-year, to US$434.2million tonnes in US dairy exports, with particular increases in sales to China, Mexico and South Korea, meant it was "now safe to project how the entire 2011 should end", the California-based Milk Producers Council said.

 

"The picture is looking good. It looks like previous record volumes for non-fat [milk] powders and cheese will be broken," the MPC's John Kaczor said.

 

Indeed, exports of non-fat dry milk - a popular Chinese import, largely for use in making infant formula - have overtaken those of dry whey to become America's largest dairy export type, by volume.

 

The US exported half its production of non-fat/skim milk powder in the first 11 months of last year, up from 47% the year before.

 

By value, total US dairy exports had, at US$4.39billion, by November already beaten the US$3.71billion sold in the whole of 2010.

 

And their importance "cannot be overstated" in protecting industry from financial misfortune, Mr Kaczor said.

 

"While [exports] were not made for the specific purpose of balancing milk supply with demand, they nonetheless serve that purpose. The alternative is for inventories to rise beyond reasonable levels, followed by lower prices."

 

But there was "no guarantee they will continue", potentially leaving the US exposed to consumption patterns which, for some products, are declining.

 

Americans drank 2.7% less fluid milk in November than a year before, as consumers switched to fizzy drinks and water, taking total losses for the first 11 months of the year to 1.4 billion pounds.

 

Domestic consumption of some other products, such as butter, is also expected to fall this year.

 

The rise in skim milk powder coincides with the decision by California-based DairyAmerica to sell the product through Fonterra's globalDairyTrade internet auctions, although it is not yet clear what level of sales the move has achieved.

 

DairyAmerica supplies missed out in Tuesday's auction on a rise in dairy prices, with values of some of its product easing below US$3,000 a tonne.

 

Prices of Fonterra skim milk powder rose across the board, by as much as 4.5% from the previous auction, two weeks before.

 

Average dairy prices, as measured by a globalDairyTrade index, rose 1.5% at the event, which was marked reductions of product for sale, by 900 tonnes for skim milk powder and 1,000 tonnes for whole milk powder.

 

"The reduction in the volume of product on offer may have assisted higher prices being obtained," Agrifax analysts said.