Although the U.S. Department of Agriculture in April lowered its 2015 U.S. milk production forecast from March by 1,100 million lbs, to 210 billion lbs, production still is expected to increase 4,000 million lbs, or about 2%, from 2014. Increasing milk supplies, along with declining exports and in some cases increasing imports, have pressured milk and milk product prices for much of the past year, but the low prices are expected to boost demand later in the year.
U.S. monthly milk production has increased from the same month a year earlier since April 2013 (with two months in that period about flat), spurred by lower feed costs and rising milk and milk product prices during much of 2014, although the rate of increase has been slowing since last September. The average price of all milk paid to farmers in 2014 increased 20% from 2013, but in 2015 is forecast to decline by 28% from 2014.
“Milk production growth is likely to be moderate in coming months,” the U.S.D.A. said in its April Livestock, Dairy and Poultry Outlook. The milk-feed ratio fell to 2.02 in February, the lowest level for the indicator since September 2013.
Additionally, milk output in top-producing California has declined from a year ago in the last four reporting months (December-March), while production for the country as a whole continued to rise.
“The impact of the persistent drought in California and other western areas seems to have increased,” the U.S.D.A. said. “Even with U.S.D.A.’s assumption of a return to normal weather patterns, low water supplies remain a concern for coming months.”
Prices for the four key dairy products, which traditionally have been used to determine the price of milk paid to farmers, all increased in 2014 and all are expected to decline in 2015 (using midpoint of U.S.D.A. forecasts). Average butter prices last year soared 38% from 2013 but are expected to fall 20% in 2015. Cheddar cheese prices jumped 22% in 2014 but are forecast to drop 24% this year. Dry whey prices advanced 11% last year but are seen tumbling 23% in 2015. Nonfat dry milk values rose 4% in 2014 but are forecast to average 30% lower in 2015.
Prices reported in Food Business News indicate current values for nonfat dry milk are at or only slightly above six-year lows, for 34% whey protein concentrate are near five-year lows and for dry whey are at four-year lows. Prices for all dry products have dropped since the first of the year, and were down about 40% to 60% from a year ago with the exception of casein, which is down about 30%. Butter and most cheese prices are up from the first of the year amid good demand, with butter down slightly from a year ago and cheese values down about 25%.
In foreign trade, the strengthening dollar and the Russian trade ban worked to slow U.S. milk product exports (with exports from major competitors of New Zealand and the European Union increasing) and encourage U.S. imports of certain products the past several months.
Total exports (milk fat and skim solids) on a milk equivalent in 2014 were 51.7 billion lbs, up 2% from 2013, but are expected to drop 9% to 47.2 billion lbs in 2015.
“Exports for February remained at relatively low levels compared with their peaks in 2014,” the U.S.D.A. said. “The United States has become less competitive in foreign markets as the U.S. dollar has risen against currencies of U.S. dairy export competitors every month since August 2014.”
Total imports in 2014 were 9.9 billion lbs, up 10% from 2013, and are forecast the same in 2015 with a decline in skim solids offsetting an increase in milk fat.
“Imports of butter, anhydrous milk fat and cheese have contributed to relatively high levels of imports on a milk-fat milk-equivalent basis in recent months,” the U.S.D.A. said.
But the U.S.D.A. expects the U.S. dairy market to improve in the second half of 2015, including an increase in exports if the Russian import ban ends as expected in August, along with domestic demand.
“With an improving economy and lower prices in 2015 compared with 2014, growth in domestic demand is expected to be robust in 2015, increasing 2.8% on a milk-fat basis and 4.8% on a skim solids basis,” the U.S.D.A. said.