August 2, 2012

 

US milk product prices achieve strongest growth in 14 months

 

 

US dairy prices reach their strongest growth in 14 months at a globalDairyTrade auction, due to slow milk production in some northern hemisphere countries.

 

Dairy prices, as measured by a globalDairyTrade index, rose by 3.5%, led by an 11.5% jump in prices of milk protein concentrate an 8.6% increase in values of butter milk powder.

 

The increase, outpaced only in the last 14 months by a 13.6% leap at the June 5 auction, defied growth in volumes of product for sale, to 45,000 tonnes, from some 37,000 tonnes at the previous even two weeks ago.

 

The rise in volumes reflected a 43% jump to about 27,000 tonnes in whole milk powder volumes, as the auction renewed sales of product from Australia.

 

Buyers paid 3.5% more for whole milk powder on Wednesday nonetheless.

 

The price appreciation comes amid a slowdown in output growth in parts of Europe, including the UK, where price cuts and high feed costs have deterred producers, and the US, where milk production rose by 0.9% last month, the weakest growth in nearly a year.

 

"As very favourable weather changed to hot and dry conditions in May and June, and the outlook for feed costs changed from disappointing to almost intolerable, [US] producers have been trimming herds and cutting rations," John Kaczor at the California-based Milk Producers Council said.

 

Indeed, the supply slowdown has supported US prices, particularly of butter and cheese, above those on the international market.

 

At FCStone's dairy division, senior broker Dave Kurzawski said: "People didn't really know exactly what to expect from today's globalDairyTrade after the surprise last month," when values fell back towards multi-year lows.

 

"However, the consensus thinking was that globalDairyTrade prices would at least converge with US ones."

 

However, Mr Kurzawski was cautious over further price rises for now, until the market discovers whether Australia and, in particular, New Zealand, the top exporter, are on for another season of bumper milk production growth,

 

"Oceania looks like it is going to start its season in a pretty big way," Mr Kurzawski said.

 

Production typically undergoes a "spring flush", reaching its high early in the season, as cows are put out to pasture.

 

"Buyers need to see growth not coming in in line with last year before any supply concerns can kick in."

 

In fact, New Zealand pasture potential, as measured by an Agrifax index, eased last week, affected by limited sunlight, and cool temperatures on South Island.

 

New Zealand, the home of the globalDairyTrade auctions, saw exports of whole milk powder soar 42% last month, taking exports for the first half of 2012 2.6% above those for the January-to-June period last year.

 

Increased exports to the United Arab Emirates and Venezuela have made up for a 4% drop in shipments to China.