That’s the conclusion of HighGround Dairy’s Eric Meyer in view of the June Cold Storage report. Meyer writes that, “While last week’s Global Dairy Trade auction results and June US Milk Production report flashed bearish warning signals to the US dairy market, Tuesday’s Cold Storage report reminded industry players that today’s inventories are NOT in sufficient order. And as such, the bull market will continue in the United States until more milk is produced into cheese and butter to grow stocks toward a more comfortable position.
Meyer warns however that “The US will eventually pay the price for becoming so uncompetitive on the global stage. Butter making a run for its all-time high of $2.80 (set in 1998) will undoubtedly encourage larger domestic butterfat buyers to look elsewhere in the near future to contract imported butter and/or AMF for import from New Zealand or other countries. Couple that with the inevitable demand destruction of a market in parabolic incline and we can make a very realistic case for an outright collapse in US prices by the end of 2014.
As stated nearly word for word as last month, our conclusion from this month’s Cold Storage report remains the same. The industry remains in panic mode to protect themselves during the summer months when milk production and component levels reach their seasonal lows. The US cheese and butter markets still have the potential to rise in the near-term in an effort to ration demand but at these extremes, expect a choppy trade. But we believe – and with growing confidence – that the inverted forward curve is foreshadowing a likely collapse in US butter prices by the end of the year.
Source: DairyBusiness Update