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Dairy exports provide many opportunities

U.S. dairy exports during the first half of this year have reached a three-year high.

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Dairy exports provide opportunities

The dairy industry and dairy traders closely watch the Global Dairy Trade auction that takes place twice each month. It is the barometer of demand and pricing for the world market. In the U.S., it has risen to one of the most important reports watched by those who trade the dairy markets. Exports have become a very important part of the U.S. dairy industry.

The dairy industry in an industry that begins with a perishable product – milk. Once it is harvested from a cow, it has a minimal shelf life in its natural state. Milk is cooled quickly on the dairy farm and picked up regularly by processors to be packaged into fluid products or manufactured into dairy products. Packaged fluid milk products have a minimal shelf life of a few weeks or longer depending on the packaging and treatment of that milk. Other dairy products have a longer shelf life due to composition, product, and storage. For example, butter can be frozen and kept for quite some time without changing its consistency. However, butter kept at room temperature or refrigerated for extended periods of time can become rancid. Cheese can be frozen but is generally not a common practice as it can change the consistency somewhat. It is generally stored and allowed to age for certain periods of time for certain varieties. Some cheese must be aged to bring it to the desired consistency and flavor for certain food applications and consumer demand. There are also yogurts, powdered milk, whey products, ice cream, etc. with most of them having a “sell by’ or “best if used by” date on them. Even with all of these limitations, dairy products are available for most consumers in much of the world.

Demand for dairy products has been steadily increasing. Many countries continue to increase milk production and imports to meet the demand of consumers. The dairy industry has moved from a more regional or country based market to a world market. The availability of dairy products was once generally limited to the production in that country. That has changed dramatically over the past few decades and even years. The dairy industry has moved rapidly into a global market with dairy products being imported and exports across borders and across oceans regularly. Supply and demand are greater than what is happening in our neighborhood, city, and region. It is what is taking place worldwide. This has had a significant impact on the fundamentals that drive dairy pricing.

Dairy exports provide opportunities

Demand for dairy products has been steadily increasing. (Source)

One could say that dairy pricing was more predictable in the past as there was more of a seasonality to supply, demand, and value. A period of “Spring Flush” generally takes place from April through June as milk production improves due to weather and cow comfort. Buyers are more aggressive during the summer and fall months as they are looking ahead to school demand and end of the year holiday demand. Demand generally improves prior to many holidays. Depending on the country and its seasonal weather, inventories build during certain times and decline during certain times. However, with the greater globalization of the dairy industry, some of these “usuals” and “seasonals” have changed. Demand can be more consistent and can change depending on milk output from various countries. Lower milk production in one country may mean greater export opportunity for another country or countries. This, in turn, may increase prices for dairy products due to greater demand.

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This is why the dairy industry and dairy traders closely watch the Global Dairy Trade auction that takes place twice each month. It is the barometer of demand and pricing for the world market. In the U.S., it has risen to one of the most important reports watched by those who trade the dairy markets. Exports have become a very important part of the U.S. dairy industry. It has also leveled the playing field to some degree as higher dairy prices in the U.S. than World prices limit export opportunities while U.S. prices that are in line with World prices increases competitiveness and export opportunities.

Current prices are in line which has improved dairy exports. U.S. dairy exports during the first half of this year have reached a three-year high. The total value of dairy exports for the first 6 months reached $2.77 billion and 23 percent above the same period last year. The two largest customers for U.S. dairy products were Mexico and China. Sales of nonfat dry milk and skim milk powder to Mexico increased 27 percent with sales to China more than double the previous year. Cheese sales to Mexico increased 16 percent. Whey exports to China from the U.S. reached a record totaling 122,597 tons, an increase of 43 percent.

Those who follow the dairy industry as a business or as a trader need to pay close attention to what is taking place on the World markets and prices in order to better assess price strength or weakness as well as business opportunities.

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DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation in writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.

Robin Schmahl was born and raised on a dairy farm in Elkhart Lake, Wisconsin. After graduating from high school, he attended college to study music. Robin then returned to the fourth-generation family farm in 1980 to work in partnership with his father before taking over the dairy farming operation. Robin joined Allendale, Inc. in 1996 as a commodity broker. In 1998, he became the manager of the branch office located in Elkhart Lake, Wisconsin. In 2001, Robin worked with DTN Ag1 and developed a dairy marketing program. Then in 2002, his office changed its status to become an IB (Introducing Broker), known as AgDairy LLC, a full-service commodity brokerage firm providing hedging and marketing programs for grain and dairy, as well as trading in all commodities. Robin’s market knowledge, analysis and practical experience makes him a natural and frequent speaker throughout the United States. Robin is a Dairy Analyst for Telvent DTN writing dairy commentary twice daily for the company. He also writes a bi-weekly column on the U.S. dairy industry for the international publication “Dairy Industry Newsletter” and “Milk Profit Brief” found on AgWeb.com as well the weekly dairy market wrap-up for AgWeb radio. Robin is a consultant for the Gehrson Lehrman Group on various agricultural topics. He has written articles, does radio commentary and been quoted in various publications as well as continuing his brokerage responsibilities. Robin has his office on the active family farm. To contact Robin email him at: [email protected] or call 877-256-3253.

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