NONFAT DRY MILK IS KEY

Earlier in the year, there were indications that a New Zealand drought would bolster U.S. prices, especially in the 2nd half of 2013. Those hopes have been moderated with timely rains and warmer weather. New Zealand pasture is back on the mend and restocking has even been mentioned in a number of industries such as cattle and sheep. Despite the drought in New Zealand dissipating, U.S. exports have had a bright spot.

The latest trade data (April 2013) showed concentrated milk and cream exports jumped 38% above a year ago in April, and up nearly 50% from March 2013. This was largely the result of an additional 15.9 metric tons of less than 1.5% Fat Milk powder being exported, and large increases in other types of powders. The nonfat dry milk price, which is the domestic component price most closely aligned with the product being exported, has only rallied slightly. Weekly data indicates that during April 2013 prices only increased $0.10 per pound or 6%. However, May and early June figures indicate prices have continued to rise another $0.16 since the last week of April.

Nonfat dry milk will likely be a price driver in the near term as it is adding substantially more to the Class IV price than normal. This is likely reflecting continued strong exports in May. Export markets accepting these products seem to be varied, with Mexico seeing the largest tonnage increase. It is unknown if this will be a continued trend, but production data in April (latest data) did not indicate a greater than normal volume being produced.