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| Market analyst says its not all gloomy for dairy economy |
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There’s been a lot of doom and gloom reported regarding the overall economy and what it might mean for dairy demand and dairy prices.
Jerry Dryer, editor of the Dairy & Food Market Analyst and chief market analyst for Rice Dairy, acknowledged the struggling economy but said Wednesday, “It’s not the end of the world,” in that there have been some positive factors as well.
Sharply lower energy prices in the U.S. and dramatically lower feed prices are two of them, he said, but he quickly adds that the lower energy prices means less revenue in the Middle East, Mexico, Indonesia, and other oil producing countries so demand for dairy exports is backing off some.
Domestic dairy demand seems to be “fairly strong,” Dryer reported, though he hears both positive and negative input. Retail sales now are pretty much unchanged from a year ago, he said, whereas they had been below year ago levels through most of 2008. Cheese is selling in “the Walmarts of the world,” he said, “and doing pretty well in traditional supermarkets.”
Cheese-friendly menus in food service specifically McDonald’s and fast food restaurants are enjoying “very strong sales,” according to Dryer, “So domestic demand is actually in pretty good shape.”
Dryer expects cheese prices to climb some more, maybe just in the next few days, the next few weeks, or possibly even the next couple of months, depending how holiday sales fare.
Retailers may have to restock for Super Bowl, he said.
On the other hand, Dryer looks for cheese to fall to the $1.40s by the end of first quarter 2009 and maybe even a tad lower by the end of second quarter.
The 1.5 percent gain in October milk production was more than Dryer expected. “Milk producers once again, proved me wrong,” he concluded.
“They figure out how to manage their way around higher feed costs and kept production per cow from dropping below a year ago and continue to milk more cows.”
Dairy set export records this fiscal year
U.S. dairy trade has been a bright spot in an otherwise gloomy national economy and Dairy Profit Weekly Editor Dave Natzke, reported in Friday’s broadcast that dairy saw a record-setting fiscal year for trade.
The value of U.S. dairy exports for fiscal year (FY) 2008, which ran from October 2007-September 2008, set a new record high, topping $4 billion. That’s up 63 percent from fiscal year 2007, when U.S. dairy exports totaled about $2.5 billion.
FY 2008 dairy product imports were valued at $3 billion, up just 13 percent from the $2.7 billion imported in fiscal year 2007.
Dairy enjoyed a $995 million trade surplus in FY 2008, according to Natzke. That compares to dairy trade deficits totaling nearly $2 billion over the previous three fiscal years ($221 million in fiscal year 2007, $895 million in fiscal year 2006, and $866 million in fiscal year 2005).
Through the first nine months of 2008, U.S. suppliers exported 51 percent of all U.S. nonfat dry milk/skim milk powder, 49 percent of the whey proteins, 55 percent of the lactose, 3 percent of the cheese and 14 percent of U.S. butter.
The bad news, he said, is the downturn in the global economy resulting in weaker markets and lower prices and that is starting to have an impact.
September U.S. dairy exports, while valued at $299 million, were down 14 percent from August and the lowest monthly total for the fiscal year. It also makes it less likely that U.S. exports would hit $4 billion for the calendar year.
While cheese exports held fairly steady, September exports of nonfat dry milk, skim milk powder, and butterfat saw the lowest monthly totals for the year. If the trend continues, 2008 will go down as a historical year for dairy trade, he said, “But perhaps one we can’t match for some time.”
CWT expects growth in herd removal program
There is a lot of interest in the Cooperatives Working Together (CWT) program’s latest herd removal effort. CWT Chief Operating Officer Jim Tillison reported that “Things are pretty rough out there and, even though feed costs are down, it looks like milk prices are beating them down so there’s a lot of interest in the herd retirement program.”
He’s often asked how many cows will be removed this time and his reply is, “As many cows as people give us good bids for.” He pointed out that the farmer’s money is spent as frugally as possible as “We don’t want to pay too much for the cows being retired but we want to get as much bang for the buck as possible.”
The deadline for submitting bids was Monday, Nov. 24.
The CWT committee announced 17 export assistance bids this week. Details are posted on our website at www.dairyline.com, but Tillison said the export business, especially on butterfat, is very strong right now.
He reported that, so far the CWT has assisted in the export of over 84 million pounds of dairy products, the equivalent of almost 2 billion pounds of milk, “So it’s a very important factor in the CWT program and, going forward, could become even more important.”
The CWT Committee approved $60 million for export assistance next year, doubling this year’s allocation, because “they realize the value of growing the market,” Tillison said. “Dairy farmers would rather produce milk than retire cows,” he concluded, “And that’s what the export assistance is all about, building markets overseas for U.S. dairy products.”
NFL partners with dairy to promote exercise
The Child Nutrition and Fitness initiative was the topic of Monday’s “DMI Update” and Paula Meabon, Wattsburg, Penn. dairy producer and DMI board member, said the program “empowers children to make good healthy choices” that, hopefully become “lifelong choices.”
The dairy checkoff works with the National Dairy Council (NDC) and the National Football League (NFL) to accomplish that, according to Mebon, and the NFL is the “star power” that sells kids on the 60 minutes a day of exercise they need and the NDC teaches “the health and wealth theme that children need to hear.”
The USDA’s Food Guide Pyramid also encourages proper eating of dairy, fruit, vegetables, and grains, she said, and, with the 60 minutes a day of exercise, it “gives children a good message.”
When asked if the NFL involvement wouldn’t be more tuned to boys than girls, Meabon answered, “No way.” The girls do the exercises too, she said, and there are many other sports offered for the girls and children in general.
“We don’t need couch potatoes,” Meabon said, “We need healthy children and the NFL brings that star power, the enthusiasm, the exercises that children really need.”
The program is a natural for the schools and encompasses everyone in them, she concluded, from the school nurse to the cafeteria to “work together for fitness.” |
| 11/26/2008 |
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