The U.S. dairy industry typically sees a bump in the prices of cheese and butter in the Fall, thanks to football season and the upcoming holidays.  Mike North, the principal of risk management with Ever.ag, said the bump happened earlier than expected this year.

 

“Yeah, that September, October peak was the peak that everyone was looking for, and it can fall somewhere in that window of September through November.  It's never perfectly dialed into a date, but the disappointing thing for us this year is that it came on the earlier end of that, and really, it was a statement from the consumer," North said.  "We have talked about this “stressed consumer” for a long time.  Inflation is no secret.  No one that avoids it.  It touches us all, and the consumer at every level, you read the quarterly earnings reports out of Wall Street and see many companies citing even the highest income consumer peeling back some of their purchases, trading down some of the things they would ordinarily buy for something of lesser quality or lesser volume, and we're seeing that happen all over.  When we took block to $2.20 a barrel to $2.60, we outpriced our consumer.”

 

North added consumers are speaking with their pocketbooks.

 

“The consumer backed away. We had enough to satisfy the Q4 needs for the football season, kids going back to school and college, and all of the wonderful cheese trays we love to take to the family gatherings we have this time of year.  End of day, once that was satisfied, they said, ‘We're done. See you later,’ and we fell 80 cents in a week and a half, and markets, you know, moved to a place where, ultimately, we clear and find value again.  If you go back and look at the charts, you'll find that before this big run-up, we spent a lot of time trading $1.65, $1.70, and $1.75 cheese.  And then we inched it higher, inched it higher, inched it higher, then blew it higher, and then that was the peak, and it was all over.”

 

North said the dairy markets are back to what he calls “market clearing” prices.

 

“The good news for dairyman is that exports, anecdotally, are moving, and as we pick up in discussions with those in the space, we would expect that that should start to show up in reporting once we get into the first quarter, and you'll start to see some bullishness around that" North said.  "But there again, we now have to keep in mind who still buys the majority of our cheese, the American consumer.  And so, I would suggest that we have room for some upside in milk, and there could be some positivity here, but every rally is worth defending.”

 

Learn more by visiting Ever.ag.

 

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