Source: Highground Dairy
Some highlights from the report:
- Stronger-than-expected US milking herd growth in Q2 and sharply lower feed costs to come during second half 2014 give us more confidence that USDA’s 3.5% YOY milk production growth July-Dec will be achieved.
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US cheese and butter markets will continue to remain much higher than global competitors through Q3 and may extend into Q4 due in part to inventories remaining well behind 2013. Also, domestic cheese and butter demand has remained robust with little to no erosion as would have been expected with extremely high prices this year.
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CME spot NDM prices have plunged over the past month and US dairy now finds itself largely uncompetitive on the global stage. Even though NDM exports have remained at record levels through June, expectations are for volumes to roll back considerably during the second half of the year.
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The US will have a difficult time competing in the international market for cheese and butter at today’s levels once product becomes available from Oceania during Q4. Last season, NZ focused on whole milk powder to service the Chinese market. But with milk powder interest from China drastically diminished from the hyper-growth period (Q4 ’14 thru Q1 ’15), NZ will shift some production back to SMP/butterfat and cheese this season to capture better stream returns for their farmers. NZ will likely win back some of the market share lost to the US and EU over the past 12 months.
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The HighGround Dairy forecast reflects some of the bearish indicators recently introduced to the markets. Annual 2015 cheese, butter & NDM prices are projected to be 17.6%, 18.5% and 21.6%, respectively below 2014’s estimated annual averages.
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