Bargain nonfat dry milk prices and faltering butter production could help balance markets in time.
In February, the United States imported more butter than it exported, but nonfat dry milk exports were better than expected now that prices are at levels not seen since early 2009.
“Strong domestic butter prices and a robust U.S. dollar likely kept butter at home in February and encouraged buyers to seek lower-cost alternatives from overseas,” says Sara Dorland, analyst with the Daily Dairy Report and managing partner at Ceres Dairy Risk Management, Seattle.
The United States became a net importer of butter in February, according to U.S. trade data released last week. U.S. butter exports in February of 5.6 million pounds were substantially lower than U.S. butter imports of 7.2 million pounds. Feburary’s butter exports were a dramatic 72 percent lower than the previous year. The United States was a net importer of butter in two of the last three months for which data has been released. Prior to that, the last time the United States was a net importer of butter was in December 2011.
“CME spot butter prices near $1.74 are priced well above butter in New Zealand and Europe, and that could continue to hamper export efforts in the second quarter of this year,” says Dorland. “And a strong U.S. dollar is only making the export situation worse.”
At the same time U.S. butter imports outpaced exports, nonfat dry milk exports in February appeared to be better than expected at 78.5 million pounds, nearly 13 percent stronger than they were in January on a daily average basis.
“Nonfat dry milk exports and are now just 1.5 percent shy of last year’s volumes,” says Dorland. “Traders are looking at February’s trade data for nonfat dry milk as relatively bullish.” Shortly, after USDA released its export data last week, buyers started to bid for product at the CME spot session.
The United States’ top-five trading partners accounted for 78 percent of NDM exports in February, but only Mexico increased imports substantially. U.S. exports to Mexico climbed 34 percent, while exports to the Philippines increased 4 percent. U.S exports to the other top-five importers of nonfat dry milk declined: Indonesia’s imports fell 42 percent; Malaysia’s were off 25 percent; and China’s fell 17 percent.
“While February was a bright spot for U.S. nonfat dry milk exports, the United States may not be out of the woods quite yet,” says Dorland. “A strong greenback continues to make European milk powders a relative deal for international buyers. With the Northern Hemisphere headed into its peak milk production with hefty global stocks of milk powders, recovery remains on the horizon.”
Slightly lower U.S. nonfat dry milk production and better-than-expected exports, however appear to be keeping nonfat dry milk stocks in check for now.
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