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Demand always leads supply

Maggie Gilles, Kansas Dairy Farmer

March 4, 2021

In the dairy industry, demand and supply are critically linked. The balance between the two drives farm gate prices. During the March 3 Hoard’s Dairyman DairyLivestream, panelists addressed the question, “Is dairy product demand or dairy product supply changing faster in today’s marketplace?”

“I would say it’s demand in our current marketplace,” proposed University of Wisconsin-Madison’s Mark Stephenson. “We aren’t sure about restaurants being opened or closed or schools serving lunches in cafeterias. We aren’t sure about some of the export products. Demand could swing really quickly and much more so than milk production does.”

Stephenson’s thoughts were echoed by T.C. Jacoby and Company’s Ted Jacoby. Jacoby has worked in buying and selling of dairy products for decades. “It’s always demand. Demand always leads supply because as demand changes, it forces supply to change. So, demand will always be the leader, and it will always move faster,” he said.

Supply still matters While all three panelists agreed about the importance of demand to the dairy structure, Kurt Epprecht, the vice president of cheese quality and dairy policy for Great Lakes Cheese, warned listeners to be aware of the changes in supply.

“It’s a demand question, but I do think we have some huge supply changes in 2021 that people have to be aware of,” Epprecht shared. He cited evidence in the form of new plant capacity in Michigan and plants converting to be able to make both 40-pound blocks and 640-pound barrels.

“I would argue we have more of a supply question than we’ve had in a long time, so hold on to your pant loops, because it’s going to get interesting,” he concluded.



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