Re: New Stock Idea
Ticker symbol: MUEL
Small Overview:
Company Name: Paul Mueller Corp.
$180M trailing sales, $14M trailing operating income, and $20M operating income run rate continuing operations.
$30M net debt
1.23sh outstanding
$44 stock, which is a 4 to 5 p.e. on taxed eps run rate and 7 p.e. on taxed trailing eps.
No analyst coverage. Under the Radar.
Details on MUEL:
Details on MUEL covered in the following article on Seeking Alpha Instablog.
Below is the same article as link above (if prefer to just read artcile on email).
MUEL: The Poster Child Of Undervalued/Underfollowed 0 comments
MUEL: The Poster Child of Undervalued/Underfollowed
You know it when you see it.
I am referring to a stock obviously undervalued based on it's trailing twelve months eps and even more undervalued based on the company's eps run rate.
This type of stock is rare, but definitely in the market.
Today's article describes one such stock.
True or False: A stock with trailing fully taxed $6.42 eps from continuing operations (without any help from one time items) and a fully taxed sustainable eps run rate from continuing operations (without any help from one time items) (based on the latest quarter times four) of $9.63, should trade at over $42.
I agree with you if you said true.
In fact, the stock should be priced significantly higher than $42.
Or put another way: At what price should a stock be with a $9.63 full taxed eps run rate and a $6.42 trailing fully taxed eps?
Most analysts would say high $90's. Some would say over $100. Some would say between $70 and $100. Most, if not all of them, would agree on a price over $68, especially when sales, margins, and backlog are all increasing together.
The company has no overhanging lawsuits, off balance sheet issues, and their income statement for their continuing operations is "clean" (no "reversals/one time items" of any kind above the operating income line).
Well, ticker MUEL, Paul Mueller Corporation, has the above eps and the stock is $42. That is the opportunity.
Below, you will find MUEL's latest earnings table with key metrics from their recent press release. Note how the operating income from continuing operations (income before one time items) is $5M for the December quarter and $14M for calendar year 2013. Note how the backlog is up year over year. Note how the margins are trending higher. Note how the total debt is lower. Also, note how all of this has been occurring with the share count staying the same and with no meaningful seasonality.
MUEL Earnings Table for 12/13Q and CY 2013
|
2013Q4 |
2012Q4 |
CY2013 |
CY2012 |
||||
|
Net Sales |
$ 49,754,000 |
$48,865,000 |
$ 181,257,000 |
$ 179,561,000 |
|||
|
Cost of Sales |
34,024,000 |
39,181,000 |
126,510,000 |
133,447,000 |
|||
|
Gross Profit |
$ 15,730,000 |
$ 9,684,000 |
$ 54,747,000 |
$ 46,114,000 |
|||
|
Selling, General and Administrative Expense |
10,569,000 |
10,625,000 |
40,662,000 |
42,036,000 |
|||
|
Operating Income (Loss) |
$ 5,161,000 |
$ (941,000) |
$ 14,085,000 |
$ 4,078,000 |
|||
|
Other Income (Expense) |
(218,000) |
(299,000) |
(883,000) |
(813,000) |
|||
|
Income (Loss) before Provision for Income Taxes |
$ 4,943,000 |
$ (1,240,000) |
$ 13,202,000 |
$ 3,265,000 |
|||
|
Provision (Benefit) for Income Taxes |
(6,896,000) |
321,000 |
(5,691,000) |
1,300,000 |
|||
|
Net Income (Loss) |
$ 11,839,000 |
$ (1,561,000) |
$ 18,893,000 |
$ 1,965,000 |
|||
|
Earnings per Common Share (Loss) Basic |
$9.65 |
($1.28) |
$15.55 |
$1.61 |
|||
|
Diluted |
$9.58 |
($1.28) |
$15.45 |
$1.59 |
Also, metrics from their press release:
Backlog: $67M v $48M Year over Year
Total debt and pension: $31M v $50M Year over Year
Shares Outstanding: 1.23M v 1.23M
Depreciation and Amortization: $6.23M trailing v $6.20M
Other:
Operating Income (EBIT) run rate: $20.6M
Operating Income (EBIT) Trailing: $14.1M
Interest Expense run rate: $.88M
Interest expense trailing : $ .9M
EBITDA run rate: $26M
EBITDA trailing : $20M
Working Capital: $57M current assets against $52M current liabilities: $5M
Cap ex in 2013 v 2012 v 2011: $6.6M v $3.5M v $1.8M
MUEL Chart and History
The MUEL chart from 1/1/2005 to current day shows a $75 stock price high in 2007. At the 2007 $75 high, MUEL had the same number of shares outstanding as today, but that old high was without the sales and income from their two large European acquisitions done with cash in 2008 which contributed $61M sales trailing in 2013 and $18M sales in December 2013 quarter. These acquired EU sales are much higher margin when reviewing past annual reports on the company.
So, currently, MUEL's operating income is roughly equal to the operating income it did in 2007 when the stock was at $75 (and had same 1.23M shares outstanding), but today, the company has the addition of the higher margin European acquisitions completed after the last stock high in 2007. This acquisition generated high margins on $61M sales in calendar year 2013. This shows the eps power of MUEL has increased significantly since the old peak eps in 2007 because in 2007, MUEL did $241M sales without the large Europe acquisitions, and today, MUEL's income is roughly the same as in 2007, but on a $200M sales run rate. This means MUEL is getting higher margins and shows MUEL has excess capacity to do even more sales.
MUEL has the same divisions in existence today as in 2007. In 2007, MUEL generated $241M sales. Now, if you add the 2008 Europe acquisitions (which occurred after the $241 sales were generated) which did sales of $61M in calendar year 2013, you get an overall sales capacity of $300M area. Currently, MUEL has a $9.42 eps fully taxed run rate (from continuing operations without any one of the one time items) on a $200M sales run rate. Obviously, with $100M more sales, the eps run rate would go a lot higher.
The capital expenditures and backlog are both up. This points to higher sales in 2014.
MUEL's capital expenditures were $6.6M in 2013, which is double 2012 and triple 2011 amounts of $3.5M and $1.8M respectively. The President's letter in the 2013 Annual Report discussed some of the uses for the higher cap ex: "This year we produced 100 milk silos on our assembly line that in 2009 was first designed to produce one silo per week. Improvements are now underway that will allow us to produce up to four silos per week. We have also seen growth in our line of beer serving tanks. These stationary tanks are usually filled in place from a truck and are used instead of mobile kegs to supply beer taps. In 2013, after launching Ntray, a new brand to improve the marketing of this product, we produced 640 tanks. In 2014, we are making improvements to allow us to produce up to 1,000 of these tanks. Our heat exchanger product line is another area that is showing growth, with an increase in revenue of 49% in 2013."
This signifies MUEL's management team is confident that capacity, efficiency, and/or service offerings are on the increase for 2014. This also translates into sales increases for 2014 and would refute any argument for sales or income having peaked in 2013. Also, backlog at December 31, 2013 was $67M v $48M year over year. Therefore, at least a 10 p.e. on fully taxed eps run rate would seem a starting point for MUEL's share price. A 10 p.e. on 2014 eps fully taxed run rate is $96. The math: $5.16M operating income from continuing operations in December 2013 quarter minus $.22M interest expense is $4.94M pre-tax income for the December quarter. This is taken times 4 quarters for the yearly run rate of $19.76M pre-tax income. After a full tax rate of 40%, the after tax income from continuing operations is $11.9M divided by 1.23M outstanding shares is $9.63 fully taxed eps run rate.
From the Yahoo Finance Profile tab: Paul Mueller Company engages in the design, manufacture, and sale of stainless steel tanks, processing systems, and equipment for the food, dairy, beverage, chemical, biofuels, pharmaceutical, biotechnology, and pure water industries worldwide. It operates through four segments: Dairy Equipment, Industrial Equipment, Field Fabrication, and Transportation. The Dairy Equipment segment provides milk cooling and storage equipment and accessories, refrigeration units, and heat recovery equipment for use on dairy farms; and service for farmers, as well as milk coolers for rent to farmers. This segment sells its products to independent dealers for resale; and directly to farmers. The Industrial Equipment segment offers food, beverage, chemical, and industrial processing equipment; biopharmaceutical equipment; pure water equipment; and thermal energy storage equipment to industrial customers. The Field Fabrication segment provides large field-fabricated tanks and vessels, such as large stainless steel storage tanks for sanitary and industrial process applications. The Transportation segment delivers products to customers and backhauls of materials and components.
The sales and income MUEL generates are sustainable because the markets they serve are growing.
MUEL has three main divisions and all three are improving.
MUEL's dairy equipment division is the most profitable division. This division serves a sector showing demand higher than supply. MUEL's dairy related customers are in an uptrend of consistently higher incomes from consistently higher volumes and higher pricing. MUEL benefits from this trend because customer supply capacity and cap ex budgets are on the increase to keep up with the higher end market demand.
Overall, the price of milk has been increasing and is today higher than in 2007 when MUEL's stock price last peaked. (see milk price chart below) from the pent up demand in U.S., EU, and Asia. See the several articles with expert analyst remarks provided later in this write up for industry statistics on the degree of dairy industry cap ex required to keep up with dairy demand, especially in Europe, where MUEL receives the majority of their dairy segment sales, due to their large 2008 EU dairy acquisition. For this reason, MUEL is an extraordinary beneficiary of EU dairy capacity trending upward.
To give an idea of EU demand, the U.K. is expected to add milk production capacity of 3M to 5M litres of milk per year for the next several years on a current base of 14M litres per year. (From March 14, 2014 article by Kate Burgess later in the report).
Also, Nestle Corporation is adding dairy capacity in Asia to keep up with demand from consumers in Asia moving to a more Western diet containing more dairy. Danone Corporation (The Dannon Company as it is called in U.S.) is another Tier 1 dairy company expanding it's cap ex budget for many of the same reasons as Nestle.
Below are charts and commentary for three publicly traded comparables.
Comparable Number One: MTRX
MTRX, Matrix Service Corporation, serves as a publicly traded comparable for MUEL's third largest division, the Above Ground Storage Tank Division (Field Fabrication Division). MTRX has a large division making above ground storage tanks and is MTRX's fastest growing division. MTRX management said in their Feb. 6, 2014 conference call: "Tank construction remains robust in our core geographic areas, and the outlook remains very positive throughout North America, including full balance of plant terminal opportunities. So if you look at the first quarter, we did I think it was a little less than $110 million for the segment. Revenues for storage. And we did around $180 million this second quarter. So I look at it, I think our business has grown. Our backlog, it's up significantly."
MTRX has 4 analysts and is expected to earn 1.50 eps in calendar year 2014 and their stock is $33, so it's p.e. is over a 20 on 2014 estimates and it's enterprise value to sales ratio at $33 is $1.3B divided by $850M equals 1.5. MUEL, by comparison, trades at a 4 p.e. (fully taxed) on it's eps run rate and at a 6 p.e. (fully taxed) on its last twelve months eps. These two fundamental comparable discrepancies are secondary reasons for a MUEL investment. The fundamentals of higher sales, higher margins, higher backlog, and MUEL's customers showing higher volumes with higher pricing in their end businesses are the primary fundamentals.
Below is the MTRX chart from 1/1/2005 to current. Notice how the current $35 price level has surpassed the old high of 2007. Over an intermediate and longer term timeframe, a MTRX and MUEL graph will typically show a similar up and down move and currently MUEL is significantly lagging MTRX. That is the opportunity.
Company Comparable Number Two: GHM
GHM, Graham corporation, is a publicly traded comparable for MUEL's second largest division, the Industrial Division. GHM makes custom heat exchangers, heat transfer equipment, and customizes/fabricates large equipment assets for various industrial verticals..
GHM and MUEL both have gross profit margins in the low 30% area. Also, each company has roughly the same percentage increase in backlog. On January 31, 2014, GHM said in it's eps release: "Graham's backlog was a record $114.6 million at December 31, 2013, up from $114.4 million at September 30, 2013 and from $90.7 million at December 31, 2012. The backlog at the end of the third quarter reflects industry diversity, with approximately 32% of projects in backlog for chemical/petrochemical projects, 25% for refinery projects, and 15% for power projects, including nuclear. All other industries served by Graham, including the U.S. Navy, accounted for 28% of backlog. Approximately 40% of backlog is for new customers gained since the prior up-cycle that reflects successful execution of the Company's revenue diversification strategy. The Company continues to expect sales of $100 million to $110 million for fiscal 2014. Gross margin should be between 31% and 33% and SG&A expense expectations are unchanged at 16% to 17% of sales."
GHM has three analysts and is expected to earn about $1.40 for calendar year 2014 and the stock is $33 with roughly $5 per share in cash, so also about a 20 p.e. on forward eps. GHM trades at a 20 p.e. on forward eps compared to MUEL trading at a 4 to 5 p.e. on forward eps. Furthermore, at $32, GHM has an enterprise value to sales ratio of $285M divided by $118M equals 2.4 for calendar year 2014. For comparison, MUEL's enterprise value to sales ratio at $42 is $80M divided by $196M equals .41 (on 2014 sales run rate of 12/13Q times 4 quarters). If MUEL's p.e. was the same as GHM, MUEL would be at over $142 per share, let alone $42 per share.
Below is the GHM chart from 1/1/2005 to present. Notice how the current $32 exceeds the old high from 2007 of $30 area. Over an intermediate and longer term timeframe, a GHM and MUEL graph will typically show a similar up and down move and currently MUEL is lagging GHM. That is the opportunity.
Company Comparable Number Three : CBI
CBI, Chicago Bridge and Iron is a publicly traded indirect comparable. In the general sense, CBI is a bellwether for the group because it is a very large diversified infrastructure management company with $13B sales providing engineering, fabrication, construction, and maintenance in various industrial verticals. Yahoo shows 17 analysts cover the company and the average calendar year 2014 eps estimate is $5.22. For calendar 2015, Yahoo shows $5.96.
The stock trades at $85, so it's p.e. exceeds 15 on calendar year 2014 and it's enterprise value to sales ratio at $85 is $10.4B divided by $13B sales =.80. This compares to the 4 to 5 p.e. and .41 enterprise value to sales ratio on MUEL's 2014 eps and sales run rate.
Below is the CBI chart from 1/1/2005 to current. Notice how the current $85 far exceeds the old high from 2007 of $62 area. Over an intermediate and longer term timeframe, a CBI and MUEL graph will typically show a similar up and down move and currently MUEL is significantly lagging CBI. That is the opportunity.
For chart enthusiasts, below are all four graphs in a row: MUEL, MTRX, GHM, and CBI.
Valuation
I was going to title this report something to the effect of: "MUEL: The Rodney Dangerfield of the Stock Market," but since some readers may not be aware Rodney's famous character and tag line of "...just don't get no respect," a decision for another title was appropriate. If MUEL stays around $42, it may be "The Rodney Dangerfield of the Stock Market." However, I believe the stock will go higher;therefore, I decided on another title.
If you believe a company's stock chart eventually catches up to it's eps and/or peer group, then it is a great time to form a position in MUEL.
MUEL's capital expenditures were $6.6M in 2013, which is double 2012 and triple 2011 amounts of $3.5M and $1.8M respectively. This signifies MUEL's management team is confident that capacity, efficiency, and/or service offerings are on the increase for 2014. This translates into sales increases for 2014 and would refute any argument for sales or income having peaked in 2013. Therefore, at least a 10 p.e. on fully taxed eps run rate would seem a starting point for MUEL's share price. A 10 p.e. on 2014 eps fully taxed run rate is $96. The math: $5.16M operating income from continuing operations in December 2013 quarter minus $.22M interest expense is $4.94M pre-tax income for the December quarter. This is taken times 4 quarters for the yearly run rate of $19.76M pre-tax income. After a full tax rate of 40%, the after tax income from continuing operations is $11.9M divided by 1.23M outstanding shares is $9.63 fully taxed eps run rate.
Below is a quick summary for the most common price to earnings valuation techniques applicable to MUEL.
An investor may choose one technique or a blend of the techniques to arrive at their own price target.
Note how all the price to earnings valuation techniques give a minimum stock price of $64.
If trades at 10 p.e. on TTM (trailing twelve months) fully taxed eps: $64
If trades at 10 p.e. on NTM (next twelve months run rate) fully taxed eps: $96
If trades at 12 p.e. on TTM: $77
If trades at 12 p.e. on NTM: $115
If trades at 15 p.e. on TTM: $96
If trades at 15 p.e. on NTM: $144
If the March 2014Q eps is similar to the December 2013Q, then the trailing twelve month eps moves to $7.96 from $6.42 because in the March 2013Q, operating income from continuing operations was $2.0M and MUEL's December 2013Q operating income from continuing operations was $5.1M (and there is minimal seasonality). So, an extra $3.1M of operating income would add $1.54 to TTM eps.
A 10 p.e. on TTM would be: $79
A 12 p.e. on TTM would be: $95
A 15 p.e. on TTM would be: $119
Another way to approach a valuation would be to ask: If Carl Icahn or other activist investor was a large shareholder, what would be their price target? Also, if a brokerage firm had analyst coverage on the stock, what would be the analyst price target? In each case, we all know it would be higher than $42.
A Seeking Alpha author wrote an article on MUEL in 2012 and included a section stating MUEL's expertise in temperature controlling liquid equipment, pressurized equipment, and above ground storage tanks may be applicable for natural gas terminal tanks (Above Ground Storage Tanks Division) and other natural gas asset infrastructure. If future natural gas related sales add to the current $200M/yr sales run rate, it would obviously benefit income and expand the p.e. ratio.
This concludes the formal portion of this article. Below are recent 2014 industry articles with quotes from experts discussing demand trends in dairy consumption and dairy equipment. MUEL's Dairy Division is the company's second largest division behind the Industrial Division, but the Dairy Division is the most profitable. See page 26 of MUEL's 2013 Annual Report for sales and income contributions from each of their divisions.
Dairy Industry Article Number One:
Mark Allen in FT: "It is a better time to be in dairy than for many years"
14 Mar 2014
Dairy farmers milk rising prices and falling costs
By Kate Burgess
"The Farmer will never be happy again; He carries his heart in his boots; For either the rain is destroying his grain Or the drought is destroying his roots." AP Herbert, English satirist, novelist, law reform activist and independent member of parliament for Oxford university, has been mostly right ever since he penned the verse in 1922.
Farmers perennially moan about the miseries of agriculture. Dairy farmers have been among the most vociferous.
Not recently, though.
Mark Allen, chief executive of Dairy Crest, one of Britain's biggest milk processors and maker of Cathedral City cheddar, says: "It is a much better time to be in dairy than for many years".
Milk producers are luxuriating in a rare combination of rising prices and falling costs, and improving terms of trade between them and the supermarkets and processors.
Even though three large supermarket groups - Tesco, J Sainsbury and Co-operative Food - cut the retail price of 2 litres of milk to £1 this month, it is not the farmers being squeezed this time. Changes to farming contracts, and an improved relationship between producers and retailers, mean the supermarkets are more likely to take the margin hit.
According to research by DairyCo, the industry-funded part of the Agriculture & Horticulture Development Board, dairy farmers are more sanguine about their future today than they have been for three years.
It was only a year ago that they spoke of cutting production and of abandoning farming altogether. Now, they talk of increasing their herds, and expanding production when EU quotas are lifted next year. Just 4 per cent of farmers questioned by DairyCo plan to quit farming within the next two years, against 9 per cent last year and 13 per cent three years ago.
A rise in the numbers of agriculture students at the University of Reading and the Royal Agricultural University at Cirencester is telling of the change in outlook.
Reading says the number of undergraduates studying agriculture has tripled in five years to about 30 a year. Cirencester says applications to its courses rose 40 per cent in 2013 alone.
"Farmers' P&Ls are looking a lot better," says Richard Whiting, chief executive of NWF, which provides ruminant feed as well as fuel and logistics services to farmers.
For the first time in decades, a litre of milk costs less to produce than to sell at the farmgate: about 30p to make and 34p to sell, according to the National Farmers' Union.
Feed costs have come down markedly since 2012, when British dairy farmers threatened to pour milk down the drain rather than sell it at a loss to British supermarkets. A lush summer last year and a bumper crop of silage means that UK cows are producing more and better quality milk, too, which has boosted margins.
A positive global economic outlook is another source of confidence, says Mr Whiting. As the world's population continues to grow - and as emerging economies in Africa and Asia, and particularly China, become more affluent - they will eat more protein and adopt a more Western diet of meat and dairy, he argues.
Dairy Crest has recently invested £45m in its cheese plant in Cornwall to increase production of whey powder for export to Asia. Arla, the Danish co-operative that makes Lurpak butter, and is the UK's largest dairy operation, has created the world's biggest fresh milk processing plant in Aylesbury. And Müller Wiseman, another of Britain's major milk processors, has spent £17m on a butter plant in Shropshire.
These investments all have a dual aim: to boost British exports; and to reduce the amounts of butter, yoghurt and high-margin dairy products imported into the UK.
Ultimately, the objective is to make Britain self-sufficient and eliminate the UK's £1.3bn dairy trade deficit. To achieve this, DairyCo calculates that UK farmers will have to churn out between 3bn and 5bn more litres of milk each year than the 14bn produced today.
All the UK processors are banking on global demand outstripping production - even production from the world's biggest dairy exporters, such as New Zealand - and recurrent concerns over food safety and security. They hope the latter will drive consumers into the arms of British farmers, as they seek the reassurance of quality products and clear labeling.
The NFU forecasts that global demand for dairy will grow at 2.3 per cent a year for the next decade - providing farmers in the developed world with "amazing opportunities," it says. Having already invested the capital in processing, distribution and economies of scale, they are best placed to cater for this rise in demand, claims Rob Newbery, the NFU's dairy adviser.
Nonetheless, British farmers' stress levels are unlikely to abate entirely. There are still sufficient variables - weather, politics, global supply, disease and currency fluctuations - over which they have no control. But, just in case a happier few forget the effect of rain on their grain, the NFU helpfully suggests they "brace themselves for volatility". http://www.dairycrest.co.uk/media/latest-news/news/2014/mark-allen-in-ft.aspx
Dairy Industry Article Number Two:
Milk Prices Skyrocketing; Analysts Say They Could Hit Record High Soon
Wednesday, 19 Feb 2014 02:06 PM
By Jonna Lorenz
The price of milk is increasing, with some analysts speculating that it will reach a record high by March.
The reasons for why the price is skyrocketing, according to NBC News, include increased cheese prices, greater international demand, and smaller herds of cattle because of higher feed costs. And the swell in milk prices shows no sign of slowing down; experts say milk could cost as much as 60 cents more by next month.
Cheese reached a record high of $2.36 a block in January, up from $1.80.
The farm price for milk has risen to about $23 per 100 pounds, up from $17 to $18 per hundred pounds a year ago, according to Reuters.
Demand in China, which began last year, is a driving force for the higher milk costs. The demand lapped up milk supplies in the United States, the European Union, Australia, and New Zealand, according to Reuters.
Dairy exports increased 18 percent last year, with specialty cheese makers in Wisconsin seeing a 23 percent boost in exports during the first nine months of the year, according to the Minneapolis Star Tribune. Read Latest Breaking News from Newsmax.com http://www.newsmax.com/TheWire/milk-prices-record-high/2014/02/19/id/553615#ixzz2xagzrRjx
Dairy Industry Article Number Three:
Good times mean higher milk price
There is also a rising domestic demand for cheese and butter. | AP Photo
By BILL TOMSON | 2/20/14 7:03 PM EST
Consumers could soon confront a 50-cents-per-gallon hike in milk prices. But it's because they presumably have more money in their pockets.
Rising domestic demand for cheese and butter, as well as strong foreign demand, will push the prices paid to dairy farmers to an average of $21.20 per hundredweight, the U.S. Department of Agriculture predicted in its forecast released Thursday.
That's a relatively small jump from the $20.01 paid last year, but it's a big leap from the $12.83 farmers were getting in 2009.
"What you'll see is that retail prices … are climbing back to where they were in 2007-2008," said Chris Galen, senior vice president for communications at the National Milk Producers Federation. "So the story is not that the rise is milk prices is an aberration … it's that the lingering effects of the crash of 2008-2009 are finally in the rearview mirror, demand is picking up globally, and supply is struggling to keep up."
There's no telling how much the additional cost of milk would be passed on to consumers in the form of more expensive dairy products, but Jerry Slominski, vice president of legislative and economic affairs for the International Dairy Foods Association, warned that consumer prices for milk "generally follow farm milk prices so I would expect higher prices for consumers."
Dairy economist Mary Ledman said some consumers could see the price they pay for a gallon of milk jump by as much as 50 cents per gallon. While some stores may instead choose to eat the added expense, many states don't allow retailers to sell milk below cost, she added.
It's all good news for dairy farmers, who have seen their profit margins rise since July 2013, said Joe Glauber, the agriculture department's chief economist, at the USDA's annual Outlook meeting, in Arlington, Va. "Margins are expected to stay above $8 per hundredweight for all of 2014," he reported.
One of the drivers for higher prices is the increasing popularity of U.S. milk in other countries, especially China.
"Dairy exports have shown remarkable growth over the past five years and are expected to grow further over the next 10 years," Glauber said in a written statement released at the USDA conference.
"Right now, the U.S. is exporting 15 percent of its milk production," he reported. "Where supply is concerned, the U.S. supply of milk has grown less rapidly than demand. Last year, milk production rose just 0.4 percent compared to 2012. Feed costs, weather, and the economic hangover produced by low prices in 2009 and again in 2012 have combined to keep a lid on the ability of farmers to expand their production."
Weather also could play a major role again in milk prices later this year, thanks to the drought in California, but it's way too early to know for sure, Glauber told POLITICO on Thursday. About 20 percent of all the milk produced in the U.S. comes from California dairies.
The drought could drastically reduce the amount of hay in California, making it more expensive to feed dairy cows, but there would have to be an actual reduction in production to affect retail prices, Glauber said.
"If forage production is adversely affected, it is clear that we will see more feed coming in from elsewhere, which would increase the costs of feed for [dairy] producers, but what that ultimately means for production - we're just going to have to wait and see," Glauber said. "Milk prices are already high … but to see what the impact of this drought is - we still don't have good production data yet to get a really keen sense of where the trends are going." http://www.politico.com/story/2014/02/milk-prices-dairy-agriculture-103749.html
Dairy Industry Article Number Four:
Milk prices could rise by $1 per gallon: experts
By James Covert
March 17, 2014 | 10:45pm
Photo: AP
Dairy prices are on the move - and this time it's the US consumer who's getting milked.
Wholesale prices for milk, cheese and other dairy products hit all-time highs Monday on a double- whammy of soaring global demand and tight supplies at home.
The result: The price of milk in Big Apple supermarkets and elsewhere could rise by as much as a dollar a gallon, according to industry experts.
Nasty weather in the Midwest has put a lid on production in recent months, and California, which produces a fifth of the nation's milk, is still recovering from a drought that ignited hay prices last year.
To make matters worse, supplies are drying up at home as domestic dairies have stepped up exports to meet surging demand in Asia, according to Aishwarya Govil, an analyst at Rice Dairy LLC in Chicago.
"China is one of the key buyers," Govil told The Post. "It's not just cheese, but milk powders that have been in high demand."
A growing taste for milk among China's emerging middle class isn't letting up, even as irregular weather patterns have hit production in other milk-producing countries, analysts say.
http://nypost.com/2014/03/17/milk-prices-could-rise-by-1-per-gallon-experts/
Dairy Industry Article Number Five:
Major investments boost Arla's profitability
Bill Bruce3 Feb 2014
Arla Foods is investing £243m to expand global production, and focus on the production of profitable export products, for the cooperative's strategic growth markets outside the EU.
With an ambition to double its exports of European dairy products to growth markets outside the EU by 2017, Arla has confirmed its investment plans for the coming year. Up to £243 million will be committed to new and ongoing dairy expansions and into projects that will help make Arla's production even more environmentally friendly.
"This year we are increasing our investments to dairies that contribute to our export out of Europe. Our sales on the growth markets outside the EU are growing at a fast pace, and we must prepare ourselves to meet the rapidly growing demand in years to come. In Arla we are determined to create good growth, and we are therefore investing almost £14 million in projects that will make our production chain even more environmentally friendly," said vice-CEO of Arla Foods, Povl Krogsgaard.
In total, almost £83m will be invested in production for Arla's strategic growth markets outside the EU - Russia, China, the Middle East & Africa.
The goal is to increase profitability in Arla's business and thereby create higher earnings for Arla's cooperative members in the long term.
Lactose expansion
The largest single investment in 2014 is approximately £58m for the ongoing construction of a new lactose production site near near Vium in Denmark. The new site will produce value-added lactose ingredients based on whey from Arla's nearby cheese production. These ingredients will be used for child nutrition products and other categories and sold to the food industry globally by Arla's subsidiary Arla Foods Ingredients.
"The new lactose site is a very important investment for us. One of our most profitable business areas is whey-based ingredients for the global food industry, and that business must be doubled by 2017. The new lactose site will produce high-quality ingredients for child nutrition products that are in high demand especially in Asia. It will contribute both to a profitable export and positively to the milk price of our cooperative members," said Povl Krogsgaard.
Other examples of significant investments in 2014 are:
- Almost £14m at Pronsfeld dairy in Germany, which exports products such as UHT-milk and milk powder to the markets in Asia and Africa.
- Over £10m at Upahl, Germany where the production of quark is to be expanded.
- Almost £9m at Arla's site in Oswestry, UK, where a new cheese packaging facility will be constructed.
- Over £7m at Holstebro Flødeost in Denmark, where a new packaging line for Buko cream cheese is to be built.
- Over £4m at Falkenberg dairy in Sweden, which will re-open as a cottage cheese dairy (in total this investment will amount to over £16m now and 2016).
Arla Foods is a global dairy company and a cooperative owned by dairy farmers. The company has production facilities in 12 countries and sales offices in a further 30, with a total of more than 18,000 employees.
The Arla history dates back to 1881 when the first dairies in Denmark and Sweden were founded. In 2000, the Danish MD Foods and the Swedish Arla ekonomisk Förening decided to merge. This was the first large cross-national meger in the Nordic dairy industry.
In 2012, Arla merged with the German dairy company Milch-union Hocheifel MUH, and British Milk Link. The mergers meant that Arla Foods grew from 8,024 cooperative owners in Denmark, Sweden and Germany to 12,300 cooperative owners in Denmark, Sweden, Germany, Belgium, Luxembourg and the UK.
http://www.foodbev.com/news/major-investments-boost-arlas-profitabil
Dairy Industry Graph of Milk Pricing:
Below is the chart for Milk prices. Notice the uptrend. Notice the new high versus 2007 when MUEL stock last peaked. MUEL's dairy related customers are buying MUEL's dairy equipment as a result of the demand discussed in the above articles.
TFC Commodity Charts
BFP Milk (DA, CME)
Monthly Price Chart
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[Intraday Quote] Charts: [Intraday] [Daily] [Weekly] [Historical] [Printer Friendly] [Legend] |
http://classic.tradingcharts.com/chart/DA/M (chart for milk prices 2005 to present)
http://www.nasdaq.com/markets/milk.aspx#ixzz2xU6Hx6jy (another chart for milk prices 2005 to present)
MUEL Corporate website:
The Paul Mueller Corporation website lists all of their press releases and annual reports from 2005 to present.