Playing nice with Russia isn’t always easy. Last year, things got dicey and a ban on dairy imports was put in place. The ban which was supposed to only last until August 2015 has been extended to August 2016. (Rumors suggest it might be around until 2018.) Why should you care? The ban on Russia is putting downward pressure on milk prices around the globe, even here at home.
Before the ban, Russia was a large importer of dairy products including cheese. They purchased an average of 25,000mt of cheese per month according to dairy market analyst Nick Buyse of FCStone. For perspective, that’s roughly more than one month of milk production for the state of Washington. Now because of the sanctions, that milk has to go somewhere else.
“All of the milk in the EU which was originally accounted for by Russian imports must now find a new home,” Buyse says. “So the EU will be much more aggressive in exporting powders and cheese to the world markets, and will make the marketplace very competitive.”
The EU is directing most of the milk that had been intended for Russia to cheese sales in other places according to Will Babler, Atten Babler Commodities LLC. That’s where the bad news arrives for the U.S. While our prices are competitive to the world market in nonfat dry milk powder, our cheese prices are much higher than others in the global market place.
“Despite continued production growth and increases in cheese stocks, U.S. cheddar cheese prices maintained a premium to international cheddar cheese prices for the eighth consecutive month during Nov. 2015,” Babler says.
Throughout November U.S. cheddar cheese prices were 4.9% higher than average European cheddar cheese prices and 7.3% higher than average Oceania cheddar cheese prices he adds.
Mike North, a commodity market analyst says that in the next year U.S. milk markets will reflect global milk markets and getting there might not be comfortable for U.S. producers.
You can expect to read more on just how low North thinks the milk price will go tomorrow.