NMPF: Don’t Blame U.S. For Low Powder Prices
Even though U.S. nonfat dry milk (NFDM) inventories were up 21% over a year ago in March, the United States is not to blame for low NFDM prices on the world market, says the National Milk Producers Federation (NMPF).
Skim milk powder is currently trading at just 93¢/lb on the world market, and at about 85¢/lb on the Chicago Mercantile Exchange. The lower U.S. price means U.S.NFDM is still competitive on export markets.
NMPF’s logic: “Normal” stock levels of powder, levels at which the markets view as needed to meet near-term needs, has gradually risen to 39 days of use for NFDM and skim milk powder. Even though March’s inventory stocks number of 298 million pounds is up 52 million pounds over a year ago, it now represents about 40 days or so of use. Last fall, the inventory level was as much as 60 days of use.
Expanded exports over the past six months have drawn down that number to more “normal” levels, says NMPF. The 298 million pound level of NFDM stocks was identical to that reported in February.
“As a result, excess production and stocks outside the United States, together with Canada’s Class 7-fueld exports, are now solely responsible for the product’s continued depressed price, as the United States is no longer a significant contributor to the problem,” say NMPF economists in the May NMPF Dairy Market Report.