Sep 18, 2014
Home| Tools| Events| Blogs| Discussions Sign UpLogin

Market Watch Diary: The Next Big Demand Story

November 1, 2011
By: Alan Levitt, Dairy Today Contributor
 
 

Levitt blueThe daily world economic news is sobering, but it’s no small comfort to be able to say that dairy, on the cusp of 2012, is still a growth industry.

It hasn’t always been so. From 1941 to 1975, despite the baby boom and our transformation into a consumer culture, U.S. milk production was flat. Since then, though, the industry has steadily expanded.

Viewed through this wide lens, the dairy demand story of the last 30 to 40 years has been about pizza and other fast food. Since 1975, U.S. milk production has increased by 80 billion pounds (some 70%) and U.S. cheese production has increased by 7.7 billion pounds. The development of a mozzarella industry in this country represents 40% of the cheese total.

If the industry is to continue to expand, where will the next phase of consumption growth come from? I’d argue that the demand story for the next 30 years will come from outside our borders.

Bonus Content


New Zealand milk production

The process is already under way. Over the last six years, most of the incremental growth in U.S. milk production has been sold overseas. It’s no longer appropriate to be asking whether we "should" be devoting our attention to exports. As long as world prices and U.S. prices are in sync, it’s all one big market and we no longer have to differentiate between customers who are "here" or "there."

That’s the key: Our prices are generally aligned with world prices now. So when the world markets strengthen, our markets strengthen. And when the world markets soften, U.S. markets soften as well.

This is happening today. Milk production has come on very strong in New Zealand and Argentina this year, and those countries have become much more aggressive in moving their excess. In the June to August period, New Zealand export volume of milk powder, cheese, butterfat and whey was up 12% from the year before and Argentina’s was up 89%, taking share from the EU-27 (–8%) and Australia (–18%). The U.S. held its own with a 2% gain, but the pressure isn’t likely to let up for some time.

exportvolumechart

Our markets will probably suffer as a result. We will see weaker markets for a time, and some will blame our "dependence" on the export market. But the genie is out of the bottle. This is how we grow now, and we’re still learning to manage and compete in this environment.

 

ALAN LEVITT is president of Levcom Inc. in Crystal Lake, Ill. You can contact him at (815) 459-1742 or alevitt@levcom.com.

See Comments

FEATURED IN: Dairy Today - November 2011
RELATED TOPICS: Dairy, Market Watch Diary

 
Log In or Sign Up to comment

COMMENTS

No comments have been posted



Name:

Comments:

Receive the latest news, information and commentary customized for you. Sign up to receive the AgWeb Daily eNewsletter today!.

 
 
Enter Zip Code below to view live local results:
bayer
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions