Demand from China continues to support record US dairy exports – Chinese imports were up 35% in 2013. Good weather and profitability in key export markets support increases in milk production in 2014. Even so, increasing demand from China will be large enough to suck up any additional outputs. Non-Chinese buyers will be eager to fill their pipelines since these markets have been starved for the past 12 months. Key import economies are doing well resulting in higher demand for dairy products.
NDM and SMP price seem to be reaching their top, but the time horizon for which prices are expected to come down continues moving outward. This will result in a slow price decline in Q1 and Q2. WPC-34 is still a good relative value to NDM for manufacturers who have the versatility to switch. Expect to see WPC-34 prices continue to rise in Q1.
US 2013 WPC and MPC exports were extremely robust and a similar trend is expected in 2014. World markets are relying on the US and EU to fill the WPC and MPC void with New Zealand and Australia exporting less. WPC stocks were 25% lower in November 2013 vs. November 2012. Prices for whey products out of the EU are on the rise supporting higher US prices. The US west coast whey price is higher than the central prices suggesting that a large pull from the export market is driving demand for whey.
All in all dairy prices are poised to remain at historically high levels in 2014. This will result in high on farm milk prices and cause US milk supply to expand. However, low stocks and high demand will support prices.