The U.S. dairy industry typically expects to see a bump in butter and cheese prices in the fall and winter thanks to football season and holiday gatherings.
Unfortunately, that bump came earlier than expected this year, and ultimately, impacted the consumers’ purchase power.
According to Mike North, Ever.Ag President of Producer Division, “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. And we have talked about this stressed consumer for a long time. Inflation is no secret. There is no one that avoids it. It touches us all, and the consumer at every level, and 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, and when we took block to $2.20 barrel to $2.60, we outpriced our consumer.”
North says that consumers spoke with their pocketbooks, backing away from the cheese counter and taking their dollars elsewhere. He says that while Q4 needs were satisfied, consumers stopped spending after that, but the dairy market is not all doom and gloom.
“The good news for dairymen 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,” he explains. “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.”
USDA is also forecasting herd expansion in the new year, with an expected year-over-year rise in milk production of nearly 2 billion pounds.
