US milk price sets a record

Publish time: 21st May, 2014      Source:
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May 21, 2014

US milk price sets a record

Rising continuously during the past few months against seasonal patterns, the price of fresh milk in the United States reached a historic level in April, Spend Matters commented.

Seasonality is an important factor in the price of milk. In the northern hemisphere, milk prices tend to reach their peak in November when production is lowest and then fall as production increases. By May the price usually reaches its lowest point in the year.


This year however, milk prices in April were 9% higher than in January and 31% up on the corresponding period last year. This is despite milk production being 1% higher year-on-year. Seasonality may not be the only driver of milk prices if there are other applicable factors.


The key reason behind this year''s unusual price increase is strong global demand for dairy products, which has led to a sharp increase in US dairy exports, outstripping the increase in production. All US dairy products exports increased in January to March 2014.


Exports of whole milk powder (WMP) and skimmed milk powder (SMP) reached 14,000 tonnes and 127,000 tonnes respectively during this period. WMP exports were up 236% and SMP exports were up 19% year-on-year. In addition, US cheese exports totalled nearly 100,000 tonnes in 1Q14, 42% higher than during the same period last year. Butterfat exports were up 115% to over 31,000 tonnes. In dollar terms, dairy products exports reached over US$1.8 billion in 1Q14, an increase of 39% over the same period last year.


Mexico, the Middle East, North Africa, South Korea, China, and Japan (in no particular order) were the top export destinations. This significant increase in global demand is due to several reasons, such as growing population, changing tastes- especially in the Far East- and adverse weather in other parts of the world affecting milk production.


The rise in the price of milk has been welcomed by some milk producers that have had profits squeezed during the past few years. Usually an increase in the price of milk is accompanied by an increase in feed cost, which does not lead to an increase in profits for dairy farmers. However, this time it is not the case for many US milk producers. According to Henry Bierlink, executive at Whatcom Farm Friends in Washington State, "It''s a welcome relief after a decade of struggling to break even."