Results of the bi-weekly GlobalDairy Trade show world prices dropped 7.9%, down for the third straight trading session. The quantity sold, at 30,044 metric tons, was also down 12% or so from previous trading sessions.
The only bright spot for prices was butter, up 2.6% to $1.23/lb. Skim milk powder prices dropped 8.1%, to 84¢/lb., whole milk powder was down 11% to 97¢/lb., and cheddar cheese was down 5%, to $1.30/lb.
Compare that to U.S. prices: Skim milk powder at 79¢/lb., cheddar at $1.44/lb. and butter, at $2.88/lb.
The bad news is that U.S. prices are still at a competitive disadvantage to world prices, except for skim milk powder, says Robin Schmahl, a hedge and marketing specialist with AgDairy, based in Elkhart Lake, Wis.
But these lower world prices also mean there likely won’t be much growth in milk supplies in competitive countries either. Rabobank estimates New Zealand production could fall as much as 10% in the first half of 2016, and the European Union will grow little, if any.
The lower prices also mean dairy products are more affordable to importing countries. And that could help eat away at the 5 million metric ton surplus now sitting in warehouses worldwide. “Lower milk pricing will help unlock additional consumption, eroding those international stocks,” says Tim Hunt, an economist and global dairy strategist with Rabobank.
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Source – Dairy Today
