Markets are now driven by demand, not supply
It’s been true of domestic markets for some time, but export markets have seen a change in recent years that has caused U.S. exporters to switch gears, encouraging higher value products. During the September 14, 2022, Hoard’s Dairyman DairyLivestream, panelists outlined these changes and what they mean for U.S. dairy producers.
“Exports have been an important part of balancing the market between the butterfat and nonfat solids, and between the different product mixes that we have,” explained Cornell University’s Chris Wolf. This balance has led to more commodity-type products hitting the export markets. The last several years, though, have seen a real shift in how exports and consumers around the world are viewed.
“What that means is a tectonic plate shift. We’re going for the first time — arguably in 100 years — from a supply driven market to a demand driven market,” shared Robert Chesler, who is the CEO of the United Dairymen of Arizona.
According to Wolf, the prior supply driven system meant that when the U.S. dairy industry had excess product, we would simply look for an outlet, find one, and move on.
“Today, we have a demand driven system, which means that it's more of a pull instead of a push on these products,” Wolf explained.
A demand driven market requires exporters to understand what consumers in international markets are looking for and deliver the product when and how they need it.
“We now have to pay attention to the economic conditions in other countries, the exchange rates, shipping costs, what's happening with the ports and with railroads, and things like that,” Wolf detailed. “And then the other side of that is we also need to be concerned with what geopolitical disputes can do.”
With all this in mind, there is more than enough opportunity for growth in exports from the United States, but to achieve industry goals, strategic partnerships and international relationships must be formed and nurtured. That is the challenge that will allow more valuable products to flow overseas, Chesler and the other panelists believe.
To watch the recording of the September 14 DairyLivestream, go to the link above. The program recording is now also available as an audio-only podcast on Apple Podcasts, Spotify, Google Podcasts, and downloadable off of the Hoard’s Dairyman website.
September 22, 2022