US milk prices are, after 21 months, to pull out of a decline, Dean Foods said, in the latest of a series of more positive signals for world dairy markets.
The group, the top US dairy processor, forecast prices of Class 1 Mover milk, the type drunk fresh, proving “flat” year on year in September, at a little over $16 per hundredweight.
That would end a period of year declines in prices, on a monthly average basis, stretching back to January last year.
It would also signal that the market had reached its low point in June, when values averaged 13.14 per hundredweight, a drop of 18.6% year on year.
The forecast reflects the latest in a series of signs that world dairy markets have passed their nadir, with last week’s GlobalDairyTrade auction, for instance, showing a 6.6% recovery from the previous event, two weeks before, including a 12.7% jump in values of whole milk powder, the benchmark product.
Gregg Tanner, the Dean Foods chief executive, flagged the role of firmer US futures markets in supporting domestic cash milk values.
“With recent increases in futures markets on both butter and cheese, we are starting to see that inflationary pressures impact the Class I milk forecast,” Mr Tanner told investors.
The rise in values had come despite increases in US milk output, with Mr Tanner underlining that “total US milk production increased 1.5% year-over-year in June, supported by increases in dairy herd and milk per cow both sequentially and year-over-year.
“The current US Department of Agriculture forecast calls for 2016 milk production to increase 1.8% year-over-year in 2016 and an additional 1.5% year-over-year in 2017.”
‘Prices likely bottomed out’
However, industry data show rising US demand for dairy products too, with consumption of milk powders up by 4.1% in the February-to-April period, and of butter by 7.0%.
“Domestic commercial use increased year over year for most products during February–April as increasing domestic prices and intense competition in world markets continue to draw products away from export sales,” Dairy Market Report said last week.
“Domestic use grew at least as fast as production for most manufactured products, as well as for total milk use in all products.”
The report, which is produced by Dairy Management Inc and the National Milk Producers Federation, added that “the dairy futures markets suggest that milk prices have likely bottomed out for the year”.
EU, New Zealand dynamics
Mr Tanner added that “looking internationally, European Union milk production continues to grow, despite overlapping unprecedented production growth in 2015”.
Data for May show deliveries in the EU, the top cows’ milk producer, rising by 0.8% year on year, to 13.72bn litres, although this was the slowest rate of growth since before the bloc in April last year ditched production quotas.
Mr Tanner added that in New Zealand, the top milk exporting country, “production continues its slight year-over-year decline but has shown a slight improvement in the recent quarter”.
The comments came as Dean Foods unveiled a 26% rise to $33.4m in earnings for the April-to-June quarter.
However, the figure, equivalent to an underlying $0.38 per share, fell a little below the $0.40 per share that Wall Street had been expecting, according to Factset.
Dean Foods shares closed down 3.5% at $18.16 in New York.
(Source – http://www.blackseagrain.net/novosti/dean-foods-calls-time-on-us-milk-price-rout-as-futures-rise)