Katelyn Allen, Associate Editor
October 29, 2020
Supply and demand have been the story throughout 2020. More unknowns about reopening plans and federal spending continue to raise questions about dairy product demand into 2021.
At the same time, there is no question that milk production is expanding, and cow numbers are climbing. Compared to September 2019, this September realized 46,000 more milk cows and 2.4% more milk. Milk per cow was also up, a trend that is sure only to continue as this year’s forage harvest has been much better than last.
These contradictions were the source of concerns about future milk prices for the panelists of the October 21 Hoard’s Dairyman DairyLivestream sponsored by Diamond V.
Sales may not stay up for long
So far, retail demand has been a relative bright spot even as food service dairy use essentially shuttered. Exports have also provided a boost over the course of the pandemic.
“From February through August of 2020, compared to those same months in 2019, total dairy sales are up 0.7% on a fat basis and 0.8% on a skim basis; so call it 0.75%,” said Cornell University economist Andy Novakovic. “The impact on dairy product sales total has been positive during this pandemic period, which might be a little surprising to some folks.”
However, that level seems unsustainable as government stimulus to consumers dries up and the Farmers to Families Food Box Program eventually expires. Instead, add 2.4% more milk, and the U.S. milk pail begins to overflow.
“We need to be wary of the fact of the underlying fundamental that production is starting to increase faster than demand and actually not by a small amount,” Novakovic added. “In normal times, these relative changes . . . would signal concern about future milk prices.”
Price risk management could be very well warranted for the upcoming year.
An ongoing series of events
DairyLivestream will air twice each month for the remainder of this year. The next broadcast, “Taking a position on milk prices,” will be on Wednesday, November 4 at 11 a.m. CST. Each episode is designed for panelists to answer over 30 minutes of audience questions.
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