March 25, 2014


Rabobank: Favourable demand and feed prices benefit US dairy




Stabilising feed prices, combined with strong Chinese demand, has US dairy producers on target for an exceptional year, according to Rabobank analysts.


Chinese demand for dairy has turned US dairy exports on their head, whether or not they are going to China; that country's domestic milk production last year was flat at best, and the country is also dealing with food safety issues, said Bill Cordingley, managing director and chief of Rabobank agribusiness research and advisory group.

That has given strength to US and global dairy prices, while feed prices are coming down; income over feed has brought extraordinary returns to US producers, he said.

"It's a bit of a perfect storm with China's demand and corn prices moderating," he said.

Margins over feed costs in the last three to six months have been the best ever seen; US dairymen are not responding with production growth as they would have in the past, due to a need to rebuild equity and concerns over labour availability, he said.

US milk and ingredient prices will moderate in the second half of the year, with milk production growth here and abroad, and pressure on producer margins – but those margins will still be attractive, he said.

Cordingley was talking to Charles McElligott, Rabobank's western region managing director, before his presentation on global commodity markets to clients at a dinner in Twin Falls, Idaho on March 4.

Rabobank officials were speaking to clients about global commodity markets in terms of price and outlook while touring the Northwest. The tour made a stop in Twin Falls on March 4.

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