Slump in US milk prices ‘may be at an end’

(Agrimoney) – The slump in US milk prices, down one-third or more year on year, “may have come to an end”, industry officials said, even as futures stabilised having set a six-year low last week.

US cash milk prices remained sharply lower last month than in March 2014, official data showed, with the value of Class III milk, as used in making hard cheeses, down 33% at $15.56 per hundredweight.

The price of Class IV supplies, used in making butter and dry milk products, tumbled 42% to $13.80 per hundredweight.

Among processed dairy products themselves, the price of non-fat dry milk was, at $1.022 per pound, less than half that a year before.

‘Strong suggestion’

However, month on month, the rate of decline slowed dramatically, and with the advance pricing of the Class 1 mover milk, used in beverages, indicating a stabilisation this month too.

The prices “strongly suggests that the steep slide in milk prices during the last quarter of 2014 and the early part of 2015 has come to an end”, the National Milk Producers Federation said.

“Futures markets suggest the same thing.”

After on Friday hitting their lowest since August 2009 on a spot basis, of 93 cents per pound, non-fat dry milk futures have stabilised this week, helped by some dealing at the low value.

“Traders were not deterred by the milestone – they exchanged 15 loads of non-fat dry milk futures at the spot market, and options volume climbed,” the California-based Milk Producers Council said.

Best-traded May futures stood at 98.55 cents per pound in midday deals in Chicago on Tuesday, up 0.10 cents.

‘Relatively balanced’

The National Milk Producers Federation attributed the market stabilisation to signs of milk output growth slowing down to match better consumption needs.

“Moderating increases in US milk production, coupled with domestic consumption growth, are counterbalancing declining exports and keeping domestic markets relatively balanced for cheese and milkfat in all products,” the federation said.

While US dairy exports remain on the decline, domestic consumption, particularly of milk powders, has been growing.

Meanwhile, milk output growth slowed for a fifth successive month to 1.7% in February, as weak values discourage producers.

The US Department of Agriculture last week cut by 1.1bn pounds to 210.0bn pounds its forecast for domestic milk production this year.

Data later

The comments come as dairy investors await results of the latest GlobalDairyTrade auction, on Wednesday, after a spell of substantial volatility so far this year.

After soaring 27% in the first three months of 2015, largely on concerns over drought in New Zealand, the top milk exporting country, GlobalDairyTrade prices have fallen nearly 19% since.

Fonterra earlier this week said that drought remained an issue in parts of South Island, although this is in a seasonally low period for milk output.