The pace at which dairy prices in Europe are picking up is astonishingly fast. Meanwhile, butter, milk powder and cheese prices have risen to levels that have never been reached before. What about in the United States, is the dairy market there also so heated?
In the United States, dairy prices have also been turning green for some time and market sentiment is as bullish to describe. The American market will also receive support from the abolition of the corona measures. In addition, US dairy exports show impressive export figures, while the milk supply has been in the red for several months. Still, the US market is less heated than it is in Europe at the moment.
American butter is also rising, but less quickly
The American butter price, for example, has also been on the rise in recent weeks, but is rising significantly less rapidly. In the meantime, European butter is almost $1.800 per tonne more expensive than American butter. Normally, European butter is several hundred dollars more expensive. This means that the competitive position of European exporters has deteriorated considerably on paper in recent weeks. However, this is not a serious threat to the good market sentiment here, as most of the butter is sold within the Eurozone. The European volumes entering the world market are relatively modest.
The US market is supported by the low stocks. Last week, the United States Department of Agriculture (USDA) released another report that showed stocks in February were nearly 25% below last year's low. According to the USDA, 263 million pounds were in stock in February. That is converted about 120.000 tons. Historically this is low, but in 2019 the stock was even lower.
US cheese stocks remarkably high
The cheese stock in the US is remarkably high. This is in contrast to Europe where stocks are described as extremely low, although there are no concrete figures here. According to the USDA, 1.469 million pounds were stored in February, which is converted to more than 650.000 tons. This volume is the highest number in years. This is reflected in the American cheddar price. Although the listing is improving, it is still far from a all time high. US cheddar is trading at around $4.500 a tonne, while prices have peaked above the $6.000 level in the past. This was in 2020. The caveat that must be made here is that the market was then quite upset by the corona crisis. The dairy chain was disrupted, which briefly led to an extreme price rally. Apart from these excesses, the American cheddar price can be labeled as historically high.
Parallels in milk powder
The US price of skimmed milk powder shows the most parallels with that in Europe. Prices have been fairly consistent for a long time. That in itself is not surprising. Both Europe and the US sell large volumes of skimmed milk powder on the world market, which means that prices tend to move more quickly. US skimmed milk powder has climbed to just under $4.000 a ton. Converted, the DCA quotation is about $500 higher, which means that American product charges more favorably on the world market. While the European market is currently rising even further, American prices seem to be leveling off.