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Non-Tech : Lifeway Foods, Inc. (LWAY) -- Ignore unavailable to you. Want to Upgrade?

To: Glenn Petersen who wrote (289)	3/12/2014 9:31:39 AM
From: richardred	1 Recommendation Recommended By Glenn Petersen Read Replies (1) \| Respond to of 338

Asian Demand Shakes Up Milk By Kelsey Gee Updated March 10, 2014 4:24 p.m. ET Asia's growing thirst for milk is spilling over into the U.S. market, pushing up prices for consumers and pressuring profits for some food makers. U.S. exports of milk powder and other dairy products to China, Indonesia and Vietnam have surged in the past year, as drought curbed production in New Zealand, historically a big dairy supplier to Asia. The record-setting exports are boosting incomes for American dairy farmers and sending milk futures soaring. But the price jump is squeezing some dairy processors, including Dean Foods Co. The largest U.S. milk processor by sales, that are caught between higher ingredients costs and still-tepid U.S. consumer demand for milk. "The business of moving product overseas has exploded over the past couple of years," said Ronald K. O'Brien II, a strategist and dairy trader for Interfood Inc., a unit of Netherlands-based dairy distributor Interfood BV. "The majority of end users have been buying hand to mouth in complete and utter shock of these prices." U.S. retail milk prices rose 1.5% in January from a year earlier, federal data show, and the government estimates prices for all dairy products will climb as much as 3.5% this year. Consumers paid $3.552 a gallon for fresh whole milk in January, the highest in 13 months. Class III milk futures, the benchmark contract at the Chicago Mercantile Exchange, rose to a record $23.21 per hundred pounds last month and are up about 20% this year. The front-month Class III contract rose 0.18 cent to $22.83 per hundred pounds by midday on Monday. "What we've seen in futures over the last two months is the sharpest upward move I've ever seen," said Eric Meyer, an analyst with Chicago brokerage High Ground Trading, who has been following the $1.8 billion milk-futures market since 2001. "This one caught a lot of people off guard." U.S. dairy exports grew by 19% by volume last year, according to the U.S. Dairy Export Council. Rising prices mean the value of those exports surged even higher, jumping 31% to $6.7 billion. Demand for dairy products in China and other Asian countries has risen rapidly for years, due to growing populations and changing tastes. Chinese purchases of foreign milk powder have grown especially fast—averaging 33% annually for nonfat dry milk since a 2008 scandal in which domestically produced milk tainted with an industrial chemical killed six children and sickened about 300,000. Total dairy-product sales to China, including milk powder, soared even faster last year, by 70% to $706 million, largely because drought in New Zealand and adverse weather in Europe and South America reduced output. The export demand has resulted in tighter U.S. milk supplies, raising the prices that farmers can obtain. The average price for milk paid to U.S. farmers in February reached a record 24.7 cents a pound, up 27% from a year earlier, according to the U.S. Department of Agriculture. U.S. consumer demand for cheese, yogurt and some other dairy products has been strong. But per-capita milk consumption in the U.S. has been falling for decades. That creates a dilemma for purveyors such as Dean Foods because it can't easily pass along higher costs without risking a decline in sales. The company last month blamed rising raw-milk costs for a sharp fourth-quarter loss. Chief Executive Officer Gregg Tanner said on an earnings call that rising export demand isn't new, but "its magnitude and intensity have been underestimated." Analysts and industry executives said milk prices could start to ease later this year. Forecasts call for higher production in the U.S. and other large dairy exporters including New Zealand and Australia. Geoff Vandenheuval, a 53-year-old dairy farmer in Chino, Calif., said he is reluctant to expand his herd after a "disastrous" period of high feed prices and relatively low milk prices in recent years. "I'm interested in getting out of debt, not putting any more money at risk," said Mr. Vandenheuval, who milks about 750 cows, down from 1,400 several years ago. online.wsj.com