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August 5, 2016 CapitalPress.com Dairy Subscribe to our weekly dairy or livestock email newsletter at CapitalPress.com/newsletters Volatile currencies impact dairy processor sales in 2015 By CAROL RYAN DUMAS Capital Press Global top 20 dairy companies ($ billions of dollars) A strong U.S. dollar, vol- atile foreign currencies and low commodity prices took a toll on the world’s largest dairy processors in 2015, causing the value of their sales to drop. That analysis comes with Rabobank’s annual ranking of the top 20 dairy companies worldwide. While a few key factors affected last year’s perfor- mance, the big story is the shrinkage of the overall market, said Kevin Bellamy, Rabobank global dairy strat- egist. “First of all we see the ef- fects of currency volatility, particularly the strength of the U.S. dollar against other currencies,” he said. Total sales of the top 20 dairy companies in 2015 amounted to $194 billion, a drop of 13 percent from 2014. In euros, however, those sales represented a 4 percent increase, he said. “That’s more of a com- ment about the strength of the U.S. dollar versus the euro than the performance of the companies on the list, but it has had an effect,” he said. The second major take- away is low commodity prices, which affected dairy markets in 2015, he said. Dairy commodity prices soared in 2014, with whole Rank Company/Country 1 Nestlé, Switzerland 2 Lactalis, France 3 Danone, France 4 Dairy Farmers of America, U.S. 5 Fonterra, New Zealand 6 FrieslandCampina, Netherlands 7 Arla Foods, Denmark/Sweden 8 Yili, China 9 Saputo, Canada 10 Dean Foods, U.S. 11 Mengniu, China 12 Unilever, Netherlands/UK 13 Kraft Heinze, U.S. 14 Sodiaal, France 15 Muller, Germany 16 DMK, Germany 17 Meiji, Japan 18 Schreiber Foods, U.S. 19 Savencia, France 20 Agropur, Canada Source: Rabobank 2015 sales $25 billion 18.3 16.7 13.8 13.1 12.3 10.5 9.3 8.6 8 7.9 7* 6.5 5.7 5.6* 5.5 5.2 5* 4.9 4.6 * Estimate NOTE: 2015 dairy sales based on 2015 financials and M&A transactions completed between Jan. 1 and June 30. Carol Ryan Dumas and Alan Kenaga/Capital Press milk powder averaging $3,764 a ton and peaking at $5,400. In 2015, the aver- age price was down to just $2,462 a ton and bottomed out at $1,450. All the other dairy products moved in tan- dem, he said. “In effect, the cake got smaller and that led to that re- ducing of turnover (sales) for the list as a whole,” he said. The third factor illustrat- ed in this year’s ranking is the continued intense level of mergers and acquisitions, with 96 such deals in 2015, he said. Last year’s top three dairy companies — Nestle, Lacta- lis and Danone — held their ranking and remain busy adding dairy sales through mergers and acquisitions, the bank reported. Nestle recently announced a pending joint venture with UK-based R&R Ice Cream. Lactalis made nine acquisi- tions in 2015 and four in 2016, and Danone has announced the acquisition of U.S.-based WhiteWave Foods. Other deals involving U.S. companies include Dairy Farmers of America taking full ownership of the Dair- iConcepts joint venture with Fonterra, which helped DFA move to fourth on Rabobank’s list this year. In addition, The Kraft/ Heinz merger moved Kraft from 16th on the list last year to 13th this year, and Agro- pur’s acquisition of Davisco Foods helped move it onto the top 20 list, displacing U.S.- based Land O’Lakes. Bank analysts also pointed out that as growth in China slowed, the world’s largest dairy companies started to look for new horizons to de- velop, and Africa is now defi - nitely on the dairy map. “We’ve talked about Afri- ca for some time. In 2014, we saw three dairy deals in Af- rica. In 2015, we’ve seen 14 deals and another four since the beginning of 2016,” Bel- lamy said. Outside Africa, other en- tries into emerging markets include Pakistan, the world’s third-largest milk producer (more than half from buffa- loes), the bank reported. Cheese climbing, butter recovering By LEE MIELKE For the Capital Press Lee Mielke one to two fewer vats a week. Others are seeking additional loads of milk to maintain full production. While manufacturers an- ticipated spot loads of milk to be diffi cult to come by at this point in the season, they re- port that they are able to fi nd them “with little diffi culty.” Cheese sales are strong. Several manufacturers of spe- cialty cheeses report diffi culty keeping up with demand and are sold out. American and processed varieties are also doing well and contacts attri- bute this to the grilling and fair season. Inventories in the Midwest are still long. Western fl uid milk intake continues to be fairly fl at. Cheese output is “steady.” Cash butter saw more meltdown last week, clos- ing Friday at $2.1350 per pound, the lowest spot price since June 3, 2016, down 15 3/4-cents on the week, but still 14 1/2-cents above a year ago, with 12 cars trading hands on the week. But the spot reversed gears Monday, regaining a penny and a half, then added 6 1/2-cents Tuesday, with 16 trades taking place on the day, and the price hitting $2.2150 per pound. Butter production is steady, reports Dairy Market News. Manufacturers are running at or near full schedules. Cream is available on the spot market and several manufacturers are capitalizing on that. Demand is “solid.” Western butter makers are “working hard to fulfi ll current contract needs and position themselves for the end-of-year butter season ahead,” says DMN. “Cream availability is getting tighter, but most butter makers are saying cream is not too diffi - cult to fi nd,” but “they expect to see changes in cream avail- ability within the next few weeks.” Spot Grade A nonfat dry milk fi nished the month at 85 cents per pound, up a half-cent on the week and 12 3/4-cents above a year ago. Sixteen cars traded hands on the week. Powder lost three-quarter cents both Monday and Tues- day, slipping to 83 1/2-cents per pound. U.S. milk production increases 1.5 percent By CAROL RYAN DUMAS Capital Press U.S. milk production in June totaled nearly 17.8 billion pounds, up 1.5 percent year over year on 5,000 additional cows nationwide and an increase of 27 pounds per cow. Milk production was a little higher than most market ana- lysts expected, but it did follow the expected trend of higher output in the Midwest — where most of the growth is occurring, said Matt Gould, of Dairy Mar- ket Analyst. While cow numbers are higher, 5,000 additional cows is not a large number. The milk production growth is mainly due to higher output per cow, he said. Temperatures were moderate in June, but per-cow output is likely to suffer in July given the heat across the country, he said. “It’s warm everywhere, but the Southwest is most vulnera- ble. The region has experienced triple-digit temperatures all week, and nighttime tempera- tures are only in the high 70s or low 80s. That’s not enough for cows to recover,” he said. Total U.S. milk production is expected to be up year over year for the remainder of the year, but that growth will be on weak comparables — an increase of 0.8 percent in the second half of 2015, he said. Dairy Market Analyst is ex- pecting milk production to be up 1.9 percent year over year in the second half of the year and up 1.7 percent for all of 2016. Nationwide, dairies are slowly expanding, adding 1,000 cows from May to June. High milk prices in 2013 led to more barn construction and dairymen are still fi lling those, growing from within to pay off the new facilities, Gould said. Milk production continued to be down in California and New Mexico, although it was down only 1 percent in Califor- nia — compared with 2 percent to 3 percent for most of the year, he said. Western states are more ex- posed to international markets, where prices have been lower than domestic markets. Drought increases feed costs because dairymen have to ship in feed. Because of that, Western dairy- men are getting squeezed on both ends, he said. That compares poorly to the June milk production, top 10 states (Millions of pounds) June Rank/ State 2016 Percent 2015 change 1. Calif. 2. Wis. 3. N.Y. 4. Idaho 5. Mich. 6. Penn. 7. Texas 8. Minn. 9. N.M. 10. Wash. 3,363 2,543 1,249 1,223 918 914 880 813 634 553 3,396 2,451 1,199 1,195 871 909 848 796 657 553 -1 3.8 4.2 2.3 5.4 0.6 3.8 2.1 -3.5 — U.S. total 17,770 17,504 1.5 Source: USDA NASS Capital Press graphic Midwest, where milk is used to make cheese mostly for the domestic market. Dairymen in the Midwest are getting a high- er milk check, and they’ve had decent weather and strong feed crops, he said. The other storyline is con- tinued dumping of milk in the Northeast, particularly New York, where June production was up 4.2 percent. The Northeast federal or- der dumped milk all last year, and everyone is saying it’s far worse this year. There’s just not enough processing capacity. The issue is largely caused by New York’s milk production, but it’s everybody’s problem in the Northeast and won’t be solved anytime soon, Gould said. It’s a different story in Idaho, where the rumor mill says milk is fairly tight. Yogurt sales for Chobani, which has a plant in Twin Falls, have been extremely strong, he said. Idaho’s milk production in June was up 2.3 percent year over year on 5,000 additional cows and an extra 30 pounds per cow. While California’s decline in milk production slowed in June, the state was down 8,000 cows and 10 pounds per cow year over year. Washington’s production held steady on the same number of cows and per-cow produc- tion. Oregon’s milk production in June increased 1.9 percent on 2,000 additional cows and an added 5 pounds per cow year over year. PEACH LUGS & 1 1 ⁄ 2 QT. CORRUGATED PEACH BASKETS 503-588-8313 2561 Pringle Rd. SE Salem, OR Call for Pricing. Subject to stock on hand. 32-2/#14 Delivery Available ROP-32-2-7/#7 #1 in Overall Satisfaction. 2 Years in a Row. Tractors for Large Acreage 47 to 97 Hp 25 West Coast dealers located near you! www.lstractorusa.com 32-1/#4 32-1/#4x C Dairy Markets ash cheese prices moved higher for the fi fth consecutive week the last week of July, though there wasn’t a lot for the mar- kets to feed on other than the hot weather. The Cheddar blocks closed Friday and the month at $1.7325 per pound, up 2 1/2-cents on the week, but 1 1/2-cents below a year ago. The Cheddar barrels held all week at $1.7750, some 7 3/4-cents above a year ago. Only four cars of each trad- ed hands on the week at the CME. Prices were unchanged Monday but an unfi lled bid jumped the blocks 2 3/4-cents Tuesday, to $1.76 per pound, the highest level since Oct. 5, 2015. The barrels were up 2 1/2-cents, hitting $1.80, high- est barrel price since Nov. 19, 2014, and 4 cents above the blocks. HighGround Dairy’s Mon- day Morning Huddle stated: “Though broader fundamen- tals are bearish, extreme heat and seasonal demand will likely keep cheese prices supported through the end of summer.” Midwest cheese produc- tion is active, according to Dairy Market News. Some manufacturers report falling milk intakes and are running 9