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Rabobank: U.S. Milk Production Likely to Flatten

August 1, 2012
By: Jim Dickrell, Dairy Today Editor

 In an analysis of U.S. and global milk supplies, Rabobank economists predicted U.S. milk production will flatten to zero year over year, perhaps beginning as early as July. The Rabobank report was released this morning.

Heat stress, reduced feed supplies and skyrocketing feed costs are all culprits. “Based on U.S. metrics, producer income over feed cost is expected to come in at just $3.96/cwt in July, less than half the indicative breakeven level and as bad as anything seen in 2009 following the global financial crisis,” say Rabobank economists.

“While the futures curve (at 25 July) suggested some improvement in income over feed costs (based on some improvement in local milk prices) it implies that margins will remain negative for the balance of 2012,” the say

“The recent rally in U.S. wholesale dairy commodity markets has already pushed U.S. spot cheese prices above prevailing world prices, something that has proved unsustainable for all but a few months since 2005,” they further report.

As a result, it is likely that the combination of flat U.S. milk production and high domestic prices will lead to a reduction in net dairy exports in the second half of this year.


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