US farmers dump leftover milk as output hits record levels
Domestic output is set to be the highest ever for a fifth straight year. Farmers are still making money as prices tumble because of cheaper and more abundant feed for their herds. Supplies of raw milk are topping capacity at processing plants in parts of the US and compounding a global surplus even with demand improving.
Agri-Mark, a 1,200-dairy co-operative in New England that had $1.1bn (€990,000) of sales last year, started pouring skim milk last month into holes used for livestock manure. It was the first time in five decades, and farmers so far have unloaded 12 truckloads, or 272 metric tonnes. While having small amounts of milk spoil or go unsold is not unusual, Northeast dairies dumped 31% more this year through May than the same period of 2014, government data shows.
“Usually we’d find someone to buy it at a reduced price, or ship it midwest,” said Bob Wellington, a senior vice-president at Agri-Mark in Massachusetts, which was founded in 1913.
“But those plants are full. There’s no way to process it in the time needed for a perishable product.”
Domestic output in May reached 8.3m tonnes, the most in any month, and is on pace to reach a record 208.7bn pounds this year, said the US Department of Agriculture. Globally, production will rise 2.1% to a record 582.52m tonnes as top exporter New Zealand sells the most ever and the EU ends limits on dairies that had been in place since 1984, the department said.
“The world needs less milk,” said Eric Meyer, president of HighGround Dairy, a Chicago broker.
Global dairy prices have fallen 39% from an all-time high in February 2014 and are the lowest in five years, UN data shows. In Chicago, benchmark Class III milk futures, used in cheese making, are down 36% to $16.11 (€14.50) per 100lbs (45.35 kilos) from a record $25.30 (€22.50) in September.
Prices may fall to $14.41 by the end of the year before recovering in 2016, said Tom Bailey, an analyst at Rabobank, New York.
These US figures equate to a current €32 per 100kilos of milk, down from a €50 high, and heading for €28.50 later this year. In comparison, the Dutch co-op FrieslandCampina guaranteed price for raw milk for April 2015 is €33.25 per 100k of milk.
New Zealand’s dollar is at a five-year low as falling milk prices amplified speculation its central bank is to cut interest rates. The kiwi slid against almost all of its 16 major peers this year.
The milk slump has been a boon to buyers, contributing to a slowdown in the pace of food inflation.
At the same time, the dollar’s rally against most of the world’s currencies helped to spur a 10% drop in US milk exports in the first four months of 2015, while imports rose 12%, compounding the domestic surplus, government data shows.
Bloomberg
