July 18, 2014 — U.S. dairy product prices appear to amaze traders but clouds are appearing on the “price horizon.” Jerry Dryer’s recent Dairy and Food Market Analyst warned
that global milk production will overwhelm demand for the next five years, according to a recent analysis by Goldman Sachs.
We talked about those clouds in Friday’s DairyLine with FC Stone dairy broker, Dave Kurzawski. Kurzawski explained the jump in butter to a “tight market” and said cheese was
“acquiescing to that.” He explained that cream is very tight in the country as ice cream sales are good.
“We’re pretty much divorced from the world market,” Kurzawski stated, “But we are still alive and well on the butter market and probably aiming at that $2.50 (per pound) mark.” Regarding the prediction on milk production, Kurzawski argued that it’s hard enough to look three or four months ahead as to what will happen to milk supply and demand but “They’re (Goldman Sachs) probably not too far off in the fact that we should expect more milk production in 2015 and probably more still in 2016. Without question, that’s the trend that we’re going to be on,” he said, “But right now I still think we’re going to be hovering around 1 1/2 percent for the balance of the year.”
Kurzawski doesn’t see any big moves in the U.S. milk supply but globally, New Zealand coming back strong and will come back strong in the new season “so we have to expect that but more than that is the demand out of China.”
Kurzawski said “It’s hard to believe when you see butter over $2.40 per pound and cheese over $2, at sustaining levels, so it’s easy to become complacent but reality is that China is currently overstocked on powder and anhydrous milkfat and that will eventually make its way through the global market chain and it’s going to come back to roost here in the U.S. with probably lower prices some time by the Fourth Quarter.”