First, let's look at a few charts on exchange rates. The USD as compared to six other currencies is shown below. A weaker USD has the impact of making U.S. cheese "cheaper" on the global market increasing exports and reducing imports.
Clearly, the USD is weakening against the other currencies. It has not reached the late 2008 levels, but it is headed downward.
One important currency we have followed is the New Zealand Dollar vs. the USD. A stronger New Zealand Dollar increases the price of New Zealand Cheese on the global market.
The New Zealand Dollar has seen significant strengthening against the USD. It also has not reached the 2008 levels that helped U.S. dairy prices, but it is headed upward.
Next we'll look at cheese exports and imports from the U.S.
Cheese exports have also started to edge upward, although they are a long way from the 2008 levels.
Cheese imports have settled down from their Q4 2008 spikes and may be headed lower if the trends continue.
The USDA released their latest outlook report on September 19.
It shows an expected continuation of the decrease in dairy cow numbers to 8,955,000 by the end of Q2, 2010. This represents a decrease of 375,000 cows from the two years prior.
By Q2 2010, Class III milk prices are forecast to be between $13.75 and $14.75 per cwt. This is a nice increase from the lows of 2009, but still a long way from the 2008 highs.
Similarly, cheese prices are expected to recover during 2010 as well hitting between $1.51 and $1.61 per pound.
Feed costs have dropped significantly as corn prices have dropped to the low $3 per bushel.
Not bad trends, but even modest recovery is still about a year away. Also slowing the recovery will be the huge cheese inventories that have been built during the low milk price periods.
No comments:
Post a Comment