News

Expect dairy prices to remain under pressure

A dairy analyst says he expects continued price pressure in the dairy market, but the U.S. is faring better than global averages.

Tom Bailey with Rabobank tells Brownfield slumped exports, increasing production and increasing imports are oversupplying the U.S. market.  “The U.S. has maintained a premium to the international market thanks to our performance of the butter and cheese markets here, which have done fairly well, and we’ve actually seen prices somewhat 20 percent or so off of the international floor at the moment.”  But, the latest Rabobank dairy outlook forecasts pressure in the coming months for U.S. butter and cheese markets. However, Bailey says they may remain higher than international prices because of stronger U.S. demand and wavering dairy production in California.

He says the lifting of European Union dairy quotas has flooded global dairy markets.  “We’ve seen 9 million tons of additional milk come online over the last 24 months from Europe, which is equivalent to New Zealand growing by 50 percent in a two year period, which has really caused a glut of milk on the market.”  Bailey says lower demand in key markets for U.S. dairy products, lower oil prices and shifts in New Zealand’s competitiveness are also factors weighing on the market.

He tells Brownfield the U.S. market is predicted to bottom out this year in the third quarter and there might be a slight increase to dairy prices heading into 2017.

AUDIO: Interview with Tom Bailey