The charts below present a comparison to the prior month. Where exports are up, so are imports. Where exports are down, so are imports. As will be shown in this post, there are only minor changes in net exports (exports minus imports).
CHEESE
Cheese pricing is by far the most important variable in producer pricing. (See the earlier post to the blog for a detailed explanation.)
Cheese net exports remain at a five-year low for the month of June, and for the entire first half of 2016. They continue to run at a rate just one-third of the 2014 pace.
Cheese exports continue at the same sluggish pace compared to prior years. However, imports are well above prior years. Imports rose steadily in 2015 and are currently staying at these elevated levels in 2016. Cheese imports are running at about 60% of export levels. Many press comments focus on only exports, but imports impact cheese inventory levels too, and thereby, impact domestic cheese wholesale prices.
Cheese exports primarily are going to Mexico, but imports are coming from a variety of sources. The major increases in 2016 are from New Zealand and Lithuania. Italy and France remain significant import sources.
BUTTER
Butter net exports fell to a new low. Butter prices from Europe are currently around $1.56/lb., with Oceania (dominated by New Zealand and Australia) around $1.27/lb. By comparison, the U.S. NASS price for July was $2.32/lb. With these statistics, it is amazing that U.S. butter has continued it's high NASS price. Domestic buyers are increasingly using alternate international sources. A price leveling between domestic and international sources is inevitable.
Increased butter imports are coming in from Mexico, Europe, and Oceania. Mexico remains the largest source. With NAFTA rules, Mexico cannot import butter from other countries and then export it to the U.S., but they can use imported butter for Mexican consumption while exporting locally produced butter to the U.S.
The story continues much the same for nonfat dry milk. Imports continue at record levels and exports remain well below the prior three years. Prices are slightly higher globally and the U.S. prices are also up slightly. However, there has been no significant increase in exports and imports are at record highs.
DRY WHEY
Dry Whey exports did improve slightly in June, but they are still at five year lows. The trend is up, and this analytic will continue to be followed in future posts.
EXCHANGE RATES
Exchange rates continue to reflect the strength of the USD. Below are the exchange rates with the most impact on dairy exports and imports. The strength of the USD vs. the Euro continues to give European dairy products an advantage in the international markets. The New Zealand dollar has shown some increasing strength in 2016, but it is still well below 2012 to 2014 levels. The Mexican peso continues to weaken, making U.S. exports to Mexico more expensive and imports from Mexico less expensive.
As mentioned in the prior posts, current and future U.S. dairy prices are showing some improvement. Although the low international prices and oversupply are crippling some international producers, which could reduce global supply, to date, there are no firm indicators that would suggest increases in U.S. dairy prices. Hopefully some supporting analytics will be appearing soon. They will be followed closely in future posts to this blog.
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