Milk, egg supplies expected larger

by Ron Sterk
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Increased production of milk and eggs in 2008 is expected to result in only minor declines in dairy prices and a somewhat larger decline in egg prices. Physical cocoa prices, meanwhile, are expected to remain stable.

In the case of dairy, much of the run-up was caused by soaring export demand as dairy supplies in Europe and Oceania were lacking in 2007. Continued strong exports are expected to mitigate price declines.

"While milk prices should be lower in 2008 than in 2007, a steep drop is not forecast," the U.S. Department of Agriculture said in its latest Livestock, Dairy and Poultry Outlook.

Although U.S. milk production in 2007 has been increasing at a faster rate from a year ago than in 2006, continued tight world supplies will support dairy product prices in the second half of 2008, the U.S.D.A. said. The Department projected milk production of 190.5 billion lbs in 2008, up 2.8% from 2007. But expected higher feed prices in 2008 could dampen U.S. milk production expansion, the U.S.D.A. warned.

Although milk and dairy product prices remained strong as the year ended, prices declined from record levels set in the third quarter. Nonfat dry milk prices for 2007 were forecast by the U.S.D.A. to average about $1.71½ a lb, up 92% from 2006. The average price for 2008 was projected at $1.67½, down only 2% from 2007. Dry whey prices were forecast to average 60c a lb in 2007, up 83% from a year earlier. Prices for 2008 are projected to average 44½c, down 26% from 2007.

"Firm domestic and export demand for all major (dairy) products except whey should keep prices from falling precipitously," the U.S.D.A. said.

For eggs, prices of which soared in the fourth quarter of this year due to tight domestic supplies, traders expect strong prices to at least carry into the first quarter of 2008. Increased molting of laying hens typically occurs shortly after the first of the year, which reduces egg supply. But with supplies already short, less molting could be induced. Still, with egg prices traditionally strong through the Easter holiday, little price relief is anticipated until the second quarter.

Breaking stock eggs, dried whole egg and dried blends were at record high levels and dried yolk prices were at 23-year highs as 2007 drew to an end. Fourth-quarter table egg prices were the highest in 47 years, the U.S.D.A. said. As table eggs supplies shrink, more breaking stock is diverted to retail, driving up the price of breakers and egg products.

Prices for all types of eggs averaged $1.34@1.37 a dozen in the fourth quarter of 2007. The U.S.D.A. conservatively projects first quarter 2008 prices to average $1.07@1.13. For all of 2008, egg prices were projected at 87@95c a dozen, down from $1.13 for 2007.

"The number of birds in the table egg laying flock is expected to gradually expand in the first quarter of 2008 as producers respond to the strong prices for table eggs," the U.S.D.A. said. Table egg production was forecast at 6,520 million dozen for 2008, up 1.6% from 2007. Egg production in 2007 was expected to be down 1.2% from the previous year.

In the cocoa market most activity has been in the futures market where speculative buying pulled New York prices to multi-month highs in December.

Physical, or cash, cocoa markets, meanwhile, are expected to be calm with minor price changes. While cocoa futures prices could trade in a range of $1,800@2,400 per tonne in New York, cash cocoa prices will be mostly steady into next year, said Judith Ganes-Chase, president of J. Ganes Consulting, Katonah, N.Y. Prices for 10% to 12% natural cocoa powder are about 60c a lb, up 20% from a year ago.

"Demand is fairly strong," Ms Ganes-Chase said. She noted the surge in dark chocolate has eased because of fewer new product introductions. She expects cocoa demand in the U.S. to drop back to a more traditional 2.5% to 3% in 2008.

This article can also be found in the digital edition of Food Business News, December 25, 2007, starting on Page 25. Click here to search that archive.

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