Dean Foods 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Most difficult operating environment ever

“This year has clearly been the most difficult operating environment we’ve ever experienced as a company. And so we remain rigorous in our focus on the things we control – price realization, cost productivity and volume at margins that deliver an appropriate return.’

Fluid milk volumes down

“Fluid milk category volumes remained soft and volume declines continued beyond what we would consider the normal trajectory of the category.’

Milk supply has grown this year

“In 2014, milk production continues to expand strongly in export regions. During the first half of 2014, milk production across the top 7 exporters increased 5.1% versus prior year. It’s expected that their milk production growth will moderate in the second half of 2014 and be approximately 4.1% for the full year. But this would represent the strongest supply growth in over a decade.”

Feed costs coming down, production going to outpace local demand

“High farm gate prices and low feed costs, especially corn, are creating strong producer margins and continuing to drive supply. Because production is expected to outpace the local market demand, even as the economy and prices ease, manufacturers will have to choose between selling at lower prices or building stocks.”

We expect costs will moderate as we exit 2014

“with solid global production against waning demand, domestic supply increasing and outpacing demand, the large and unfavorable differential in US versus international dairy prices, as well as other factors, we expect domestic raw milk cost to moderate as we exit 2014 and move into 2015.”