Where is the Dairy Industry Headed?

As of recent, the dairy markets have struggled to find direction.

“I think the reason the market can't get enough traction right now is simply that there's just a little bit more product than is needed right now, and if you look at the milk production reports," said Bryan Doherty, with Total Farm Marketing.  "I think they say everything. Milk production per cow is up. Milk cows are up. Efficiency, that's the milk production per cow, is really important. Good feed. Cheap feed. You've got a lot of good things, but the big catalyst may be behind this idea that the herd holding together or growing a little bit month in and month out is this very, very, very nice price for beef calves or calves, and so it's a balancing act between breeding for beef and trying to hold heifers back and not hold heifers back. So, I think there are just a lot of dynamics.”

The late August-early September bounce in the butter price never took place.

“It is a product that is very attractive to the marketplace right now, and I wouldn't be surprised if we see the butter market all of a sudden start to make a turn and move, at least respectively, back toward the areas where it came from," Doherty said.  "Looking for that $2 to $2.50 area. To get overly optimistic on that, I think we have to have some strong expectation that world inventories are getting narrowed down, or that demand is going to increase. Global dairy trade reflects all of that, and the global dairy trade has not had a strong track record as of late. In fact, it's been a weak one. So, you've got a weak international market event, ample inventory, and it's a good bargain.”

Doherty is encouraging producers to be patient because more demand will cycle in.

“What I'm trying to do is temper attitudes that we're at market-clearing prices that are reducing the cow herd, that the dairy herd worldwide is on the decline, and that we're ready to see a big run higher," he said.  "Unfortunately, we're still in the expansion phase right now, and part of this might be the growing pains of looking at an expansion of plants that can handle the inventory. We need more cows, and more cows, more inventory, more product at a lower level, at least for a while.”

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