What triggered high milk prices? Exports

Forget where you are and what time it is right now. Close your eyes and set your brain as if today was at the end of July 2013.

Milk Class III price stands at $17.38/cwt; class IV at $18.90/cwt. The USDA announces the ending stocks for various dairy products (how much sits in warehouses). The ending stocks of American cheese are estimated at 710 million pounds, up from 630 million pounds in July 2012. Ending stocks for butter are at 325 million pounds, up from 250 million pounds in July 2012. For non-fat dry milk (NFDM), stocks are at 230 million pounds vs. 150 million pounds in July 2012.

In short, all major dairy products inventories are running very high: we are stockpiling dairy products.

This prompted a famous dairy economist from Wisconsin to forecast a major downward slide in milk prices, perhaps even a price crash. But here we are in early February 2014 with a January Class III price of $21.15/cwt and a Class IV price at $22.29. So was the dairy economist an idiot or what?

Global game

What happened is that the game is no longer being played in Wisconsin — or California. The U.S. has become a major dairy exporter and years of efforts by the U.S. Dairy Export Council are finally paying back.

As a percentage of total U.S. production, we are now exporting more dairy products (roughly 16 percent of national milk solids production) than corn (roughly 11 percent of national production).

Our dairy exports in 2013 increased by 18 percent in volume and a whopping 31 percent in value to reach $6.72 billion. We exported roughly 550,000 metric tons of NFDM/skim milk powder (SMP), 312,000 metric tons of cheese, and 90,000 metric tons of butterfat.

Whole lotta milk

If you are like me, you have no idea how much milk is needed to make a metric ton of anything. So let me do the conversion for you.

It would take about 13.5 billion pounds of milk to make our 2013 exports of NFDM/SMP, 6.9 billion pounds of milk for our 2013 cheese exports, and 5 billion pounds to make our butterfat exports.

Mind you, these numbers are not additive: you do make both butter and NFDM out of a cwt of milk. But in all, nearly 16 percent of our total milk solids production was exported last year.

Put differently, we exported the equivalent of 31.2 billion pounds of milk, or more than the total annual milk production from New York, Ohio and Pennsylvania combined.

Credit due

I have mentioned the critical role played by the U.S. Dairy Export Council in increasing our exports over time. Building up export markets for U.S. dairy products takes a lot of time. In many countries, buyers need to form strong relationships with sellers before they will commit to an order.

The U.S. had also built a reputation of being an opportunistic exporter: exporting only in times of domestic surpluses. If you are a buyer in China, Saudi Arabia or Morocco, you want to deal with a supplier who can reliably fill your pipeline.

The second problem that we face is that our major competitors (Oceania, European Union) have a freight advantage in delivering products to many of the major importing countries.

This is where the CWT (Cooperatives Working Together) is playing a pivotal role. For the last three years, CWT (primarily dairy cooperatives representing over 70 percent of the milk produced in the U.S.) has focused on providing financial assistance to the export of targeted dairy products.

In 2013, more than 80 percent of the exported American-style cheese and 50 percent of exported butter received some form of export assistance from CWT.

The positive economic impact on our domestic milk prices from our dairy exports in general, and the CWT assisted exports in particular is unquestionable.

The money set aside in CWT by dairy producers has arguably been their best investment in the last three or four years.

What if my co-op doesn’t export! You still get a huge benefit. For example, most of the NFDM/SMP exports originate from California. Imagine if the equivalent of 10 billion pounds of California milk was trying to find a place on our domestic market. Do you really think that the CME cash cheese price would still be trading well above $2/lb.?

The good news

It is unlikely that the current prices will be sustained; at some point they are doomed to drop. The questions are when, how, and how much.

I really don’t know when… As for the ‘how’, all indications are that our exports are to remain strong at least in the first half of the year. How much? I don’t know, but all indications are that milk supply would start being affected with a Class III price under $18/cwt.

In short, I see excellent prices and margins in the coming months.

About the Author

Normand St-Pierre is an Extension dairy specialist at Ohio State University. Questions or comments can be sent in care of Farm and Dairy, P.O. Box 38, Salem, OH 44460. More Stories by Normand St-Pierre

4 Comments

  1. Adult humans do not need cow’s milk any more than they need goat’s milk, wolf’s milk, camel’s milk, giraffe’s milk. Unweaned infants do remarkably better on their own mother’s breast milk which is what our species was intended to consume. There’s absolutely nothing beneficial to the human diet in cow’s milk that can’t be gotten through plant based sources.

    Female cows are forcibly artificially inseminated to become pregnant and continue lactating. After 9 months, the dairy industry steals these baby calves shortly after they are born. The “worthless” males who can’t make milk are either killed immediately or kept in isolation for a few months to become veal. The unfortunate females calves follow their mother’s sad lot all the way to the last moments on the kill floor when they are no longer “productive”.

    Thankfully there’s abundant plant based alternatives that are just as nutritional, just as satisfying and just as versatile in cooking. Some even have twice the amount of calcium and vitamin D as cow’s milk does.

    Dairy is also destructive to the environment and a tragic waste of resources. Perhaps it is time for “unweaned” adults to look beyond what deceptiveness and hype the dairy industry is pitching at you in order to keep their profits and their cruel practices in check.
    http://www.youtube.com/watch?v=8GrbYVsK7vs

    • Normand St-Pierre says:

      Your comment is starting to sound very hollow when it has been posted verbatim on a minimum of 178 other internet comment sites over the years. So I will not waste my time to point out the numerous ways in which you are misinformed, grossly incorrect, and even malicious. Frankly, you now sound like an old broken record, and this is not meant to be a compliment…

    • Seasoned_Citizen says:

      Bea–tell me something:

      How in Heaven’s name is a poor family (barely scratching out a living in today’s economy) supposed to get “enlightened” to what you’re advocating?

      Believe me–after Mommy and Poppa come home after busting their humps all day working 1-2 jobs EACH, they are in no mood to “save the planet” or “save” anything, except their own tired, worn-out hides, since it all re-sets every morning to yet another grind of daily living.

      A cool, fresh glass of milk or a cup of milk-based hot chocolate is what the doctor ordered for tired and worn out souls and their children.

      I have toured many dairy operations in Ohio. They are all run very humanely and efficiently. May there be some not so? Sure. The forces of the market will weed them out and they will no longer be either competitive nor productive.

      Might a cow or two be mis-treated in America’s dairy industry? Sure. We are all against that and it should be stopped wherever possible or known.

      Hey–you are very concerned with Planet Earth, eh? You are very concerned about bovines getting “used and abused” right?

      Answer me this: what about the 55,000,000 U.S. human babies killed and tossed in the trash dumpster since Roe v. Wade? Who speaks for them?

      All these “animal rights” folks would trumpet the fact that a one-celled bacteria was found on Mars or the Moon. This would make earth-shaking news to them (and others.)

      BUT–explain to animal rights activists that 3,562 tiny and defenseless human being are slaughtered each and every day in America alone–under the most barbaric and gruesome methods inflicting horrific pain on sentient beings–well–THAT’S another story. It has inflicted unheard of pain on grieving mothers AND fathers.

      Turn inward, Bea. Start protecting your own species first. Then, we’ll talk about others.

      • alyr says:

        “a cool fresh glass of milk is just what the doctor ordered”.

        NONSENSE.

        And the fact that you think that a society that exterminates babies would show ANY compassion for animals is laughable.

        Google downer cows and learn something.

Leave a Comment

Receive emails as this discussion progresses.

eNewsletter

Get our Top Stories in Your Inbox

Services

Market Reports by State

Recent News