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Dairy Commodities Update

June 06, 2016

Milk Production
There is a lot of milk out there. The European Union is still producing milk. Despite falling farmgate prices and stocks moving into intervention, dairy farmers are still putting up huge numbers. EU output on a January-to-January basis grew over 5%. One publication compared that to a US growth of almost 7% and a whopping 35% or more in New Zealand. This is a lot of milk. There is talk about allowing voluntary supply controls by
countries. This would be a return, to some degree, of a form of quotas that the European Union just jettisoned.

US production grew tepidly at 1%, led again by the Midwest at 4.3%. California and the Southwest remain in the negatives. The Northeast showed strong output at 2.5%. New Zealand’s output continues to be hampered in part by poor commodity prices and poor returns at the farm level. Farmers are expected to dry off cows early rather than limp along with the feed, labor and energy expenses associated
with milking. If there isn’t a turnaround in pricing soon, they could also see an increase in culling.

We have entered into an extended period of very low pricing in the powder markets. Both nonfat and whey continue to hover at lows not seen in years or, in the case of nonfat, ever. Producers note some signs of a potential price increase...

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