World dairy prices: Low and recovering slowly

There are some positive signs in the world market, according to USDA’s Foreign Ag Service. New Zealand holds periodic auctions of whole milk powder, and those prices have been rising slowly. But world dairy markets remain “frail”, says FAS, and most major economies are expected to recover slowly. This will mean slow recovery to world dairy prices . . . and U.S. milk prices.
There is no one world price for milk. World dairy trade involves various milk powders, butter, cheese, and a variety of other milk-derived ingredients. You just have to take some world market prices and try to compare them to market values here in the U.S.
For example, the skim milk powder price in Oceania (Australia and New Zealand) is about 96 cents a pound. In Europe, it is about $1.08. This compares to a recent U.S. nonfat dry milk cash price of 99-1/2 cents. Oceania Cheddar is around $1.25 a pound compared to a U.S. barrel price of $1.31. Butter is around $1.50 in Europe, 96 cents in Oceania, and $1.17 here.
After a year of severe drought, New Zealand is boosting milk output 8 percent this season, and Australia’s milk production is recovering as well.
The European Union has reactivated its export subsides, and the U.S. has reactivated DEIP (Dairy Export Incentive Program). Both actions will tend to hold down world prices. Plus, as much as higher dairy price support levels are needed here, nonfat dry milk inventories here and around the world will build, putting a damper on world dairy price recovery.
Unfortunate as the situation is, it seems it is likely to be many months before our economy and other world economies stimulate dairy product prices to any significant degree. And, sadly, Class III milk futures prices confirm this.