Bearish signals continue to gather as to future milk checks.
Over the past five months, USDA economists have lowered their prediction for the All-Milk price by $1.45. As it stands, the 2016 estimate is a $16.50 per cwt. midpoint in the latest World Agricultural Supply and Demand Estimates report. The range was $16.05 to $16.95.
While the U.S. has experienced rather robust demand for dairy products, the same cannot be said in other parts of the world, especially China and Russia, which have stepped back on dairy product purchases.
"At this point, the global dairy product markets are in shambles - grossly oversupplied with prices having tumbled, across the board, in an effort to clear markets," wrote CoBank economists in their October 2015 Quarterly U.S. Rural Economic Review.
"Our medium-term outlook for the U.S. dairy industry is more bearish than the consensus," they went on to write. "There are two reasons. First, we're doubtful the U.S. dairy industry can stage a recovery without support from exports. Second, we do not see market fundamentals changing for the better until early 2017, notwithstanding current dairy futures prices," noted CoBank.
"The risks to the U.S. dairy industry lie predominantly on the downside, and we suspect that the cyclical upturn will likely be delayed until early to mid-2017," they projected.
In the near-term, U.S. dairy exports, which have accounted for 14 to 16 percent of U.S. milk production, have slumped. American cheese exports fell for the fifth straight month this past August, down 28 percent from last year and the lowest total in 31 months.
Even with the near-term being bullish, dairy appears to have a bright future as global per capita dairy consumption could grow 13.7 percent by 2023. That was the prediction of the International Dairy Federation. Presently, global per capita intake stands at 244 pounds with the U.S. at 614 pounds of dairy products per person.
(c) Hoard's Dairyman Intel 2015
October 19, 2015
