Milk-cow drought culling accelerates as prices jump

Record Exports

U.S. exports of cheese, whey, lactose and other dairy products reached records last year, valued at $4.82 billion, or 30 percent more than in 2010, according to the Arlington, Virginia-based U.S. Dairy Export Council. The total amount of U.S. dairy products shipped will increase 2 percent to 5 percent this year from 2011, the council forecasts.

Dairy costs will be “meaningfully higher” for Starbucks Corp., the world’s largest coffee-shop chain, in its fiscal year that began Oct. 1, Chief Financial Officer Troy Alstead said on a conference call with analysts July 26. Starbucks has said dairy accounts for about 5 percent to 10 percent of its cost of goods, while coffee makes up 15 percent to 20 percent. Arabica- coffee futures are down 25 percent in the past year. Shares of the Seattle-based company gained 6 percent in 2012.

Raw-milk prices probably will climb next year as the cost of feed increases, Michael Schlotman, chief financial officer for Cincinnati-based Kroger Co., the biggest U.S. grocer, said on a conference call with analysts Sept. 7.

Loss Program

U.S. farmers lost the Milk Income Loss Contract Program, which protects producers from high feed costs, when it expired Sept. 30. The end of the subsidy may have a limited impact for now because feed prices typically decline at the end of the harvest, said Vincent Smith, an agriculture economics professor at Montana State University in Bozeman.

Dairy farmers in California, which produced 41.46 billion pounds of milk last year, may be suffering more than in other states partly because they are reliant on imports of corn, soybeans and alfalfa hay, said Michael Marsh, the Chief Executive Officer of Western United Dairymen, a Modesto, California-based trade association.

U.S. corn and wheat inventories before next year’s harvests probably will be smaller than the government forecast in September after the worst drought in 56 years hurt crops, according to the average of as many as 30 analyst estimates in a Bloomberg survey. The USDA is scheduled to update its estimates on Oct. 11.

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