August 5, 2016
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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.
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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