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| Dairy producers can give thanks for understanding ag lenders |
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One of the things farmers can be thankful for is having a generous and understanding lender that may have allowed some farmers to tap into the equity that they’ve built up in order to stay afloat.
Other things to be thankful for are USDA and Congress, according to Galen, who helped out dairy farmers. The Cooperatives Working Together (CWT) program has also done some heavy lifting in reducing the national dairy herd to a level where milk production and consumption are in alignment.
“I think the other thing we should express gratitude for is that there are consumers out there,” Galen said. “Even during the recession, we saw an increase in consumption of cheese and milk.”
“Consumers have been very faithful,” he said. A lot of people have less money to spend, but are still buying dairy products.
“So we should be thankful for everyone that had dairy products on the dinner table during this holiday,” he concluded.
DMI hosts joint dairy meeting
Dairy Management Incorporated’s Joe Bavido began a three part series on Monday’s “DMI Update,” reporting on the recent joint annual meeting in Texas of the National Dairy Board, United Dairy Industry Assoc., and National Milk Producers’ Federation.
He reported that there were about 1,000 dairy producers and industry representatives who attended and that he was pleasantly surprised that the mood at the meeting was not depressed, considering the economic hardship the industry has been through of late.
“The little bit of light at the end of the tunnel that is showing now is giving them some hope,” Bavido said, and that message was delivered to attendees by Tom Gallagher, CEO of the National Dairy Promotion and Research Board. Gallagher acknowledged how tough it has been to be a dairy producer the past year, but he discussed what the dairy checkoff has done on their behalf to improve sales.
The industry has a roadmap to increase dairy product sales, Bavido said, and Gallagher touched on a study conducted for the Innovation Center for U.S. Dairy to analyze international dairy opportunities and reported that the study shows a growing market for U.S. dairy exports, if the industry can capitalize on it.
He said the global economic meltdown does not change the fact that there will be more people, more places, with more money who want dairy products. He said the U.S. dairy market is a growth market and history shows that per capita consumption of dairy products between 1951 and 1972 declined considerably by 175 pounds and, from 1972 to 1983, consumption was relatively flat, but from 1983 to the present, sales have increased by more than 80-pounds per capita and 1983 was the year that the national dairy checkoff law was enacted. “This shows to us that the checkoff is getting results and is increasing sales of dairy products,” he concluded.
Cash cheese shows strength
The cash cheese market showed more strength during the shortened Thanksgiving week. The blocks gained five cents, to close at $1.65 per pound, but that’s still 15.25 cents below a year ago. Barrels gained a penny, to close at $1.51, 28-cents below a year ago and 14 cents below the blocks. Three cars of block traded hands on the week and five of barrel.
Butter remained unchanged at $1.5250. That’s cents, 2.5 cents above a year ago. Sixteen cars traded hands on the week. Cash powder was quiet with Grade A and Extra Grade both remaining at $1.40.
Dairy economist Brian Gould, associate professor at the Department of Agricultural and Applied Economics at the University of Wisconsin-Madison, sees the steady increase in the cash dairy markets continuing, especially in light of what is going on internationally.
The production in New Zealand and Australia is not going to be as high as initially forecast. “Since July, we’ve had a steady increase in the international prices of whey, skim milk powder, cheddar and butter,” he said. “And they are increasing not only in dollar terms but also relative to the U.S. prices.”
Gould says the outlook is great for the continued increase in demand for U.S. dairy products. “Given the increase in importance of export markets, I think it bodes well for the continuation of higher cheese prices in spite of having pretty high cheese stocks,” he said.
In terms of relative values, the ratio in New Zealand, dry whey is about 40 percent above the U.S. domestic price. Nonfat dry milk skim milk powder is up about 30-35 percent and butter is about 20 percent higher. “Making our export markets very attractive relative to what they were just six, seven months ago,” Gould concluded.
With USDA likely to pay out emergency aid in December, and stronger domestic dairy sales improving the milk price outlook for 2010, things are looking better for the nation’s dairy farmers next year. Dairy Profit Weekly Editor Dave Natzke weighed in on the global picture on Friday’s DairyLine.
Shortage of milk in 2013
A report presented in mid-November at the joint annual meeting of the National Dairy Promotion and Research Board (NDB), the National Milk Producers Federation (NMPF) and the United Dairy Industry Assoc. (UDIA) indicates there could be a 7 billion pound shortage of milk by the year 2013.
According to Natzke, the best opportunity for the U.S. dairy industry to compete in the global market is coming in the next 5-8 years. The U.S. dairy industry has great potential to be a world dairy supplier – if it makes some changes.
Speaking to nearly 1,000 dairy producers at that meeting, Clinton Anderson, a partner in the business consulting firm of Bain & Company, said a study conducted in conjunction with the Innovation Center for U.S. Dairy estimates worldwide demand for dairy products will grow faster than available supply, leaving the United States with a window of opportunity.
He warned, however, that structural constraints get in the way of the United States serving that market. Some major challenges the report cited include severe pricing volatility, market distorting pricing mechanisms and insufficient customer focus. In other words, failing to produce dairy products in the form the world market demands. Failing to address these issues, as farmers and processors working together, will lead to a less competitive U.S. dairy industry, Anderson concluded.
It’s been a difficult year for the dairy industry and it doesn’t seem like there’s much to be thankful for this Thanksgiving. But “There is light at the end of the tunnel,” according to National Milk’s Chris Galen, who said on Thursday’s DairyLine that if you are still in business, prices are turning around and are looking much better in 2010.
“Obviously there is still a lot of collateral damage; there’s been a huge amount of equity that’s been lost,” Galen said. |
| 12/2/2009 |
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