U.S. Dairy Exports Continue to Affect Domestic Dairy Product Prices
By Bob Yonkers, IDFA Chief Economist, Ph.D.
After increasing nearly 23% in 2007, U.S. dairy product exports continued to expand in January 2008, rising more than 13% over the same month last year, according to the U.S. Department of Agriculture's (USDA) Foreign Agricultural Service. A key factor driving this growth is that wholesale dairy product prices in the U.S. market remain below reported world price levels.
Several dairy product categories showed strong export increases in January. Specifically, nonfat dry milk exports reached 71.6 million pounds, up 94%; cheese and curd exports increased 52% to 23.5 million pounds; butter and milkfat exports totaled 14.2 million pounds, up 2,180%; and dry whole milk exports were up 182% to 6.3 million pounds.
The domestic and international dairy product price data for cheddar cheese, butter and nonfat dry milk (international prices only for skim milk powder), as reported by USDA's Agricultural Marketing Service, appear in the following set of charts.
Figure 1 shows that the world price for skim milk powder (average of the prices reported for Europe and Oceania) consistently exceeded the domestic nonfat dry milk price since mid 2004. USDA's most recent data shows that the world price averaged $1.61 per pound for the two weeks ending March 28th, while the domestic price reported by the National Statistics Service (NASS) averaged $1.25, over 22% lower, for the most recent two weeks.
After many years of domestic prices remaining well above the world price for cheddar cheese, these prices were about equal for 18 months beginning in early 2006 (Figure 2). Beginning in May 2007, however, the world price for cheddar cheese (reported for Oceania only by USDA) has consistently exceeded the domestic price reported by NASS. For the most recent two-week period, the international price was $2.30, while the domestic price was 15% lower at $1.96 per pound.
Even butter, with a long history of having domestic price exceed world price by a large margin, recently has shown the same pattern as nonfat dry milk and cheddar cheese. Since June 2007, the world price for butter has remained far above the domestic price (Figure 3). Most recently, USDA reported the international price (average of the Europe and Oceania prices) to be $1.90, with the domestic price nearly 33% lower at $1.28.
While reported price levels in both the domestic and international markets are lower than the record levels recorded last year, prices remain well above historical levels. As long as world prices remain significantly above domestic prices, exports will remain a key factor in U.S. dairy markets.
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Posted March 31, 2008