Not Limping, Not Speeding
Summer has arrived, but not much has changed in the dairy markets – there are a few bright spots, a few areas of softness, and a lot of angst about the world around us. Butter remains the only compelling act with depleted stocks, solid exports and a firm global market. Beyond the next 60 days, however, the picture for butter could be entirely different as a variety of forces take hold. The cheese market still seems hopelessly range-bound. As for powder, there is a sense that front-loading chickens are coming home to roost. Turning our forecasting attention to 2011, we find numbers that look a lot like those for 2010, at least on an aggregated basis.
In the On-Deck Circle: New Zealand
When the New Zealand Ministry of Agriculture and Forestry released its milk production forecast for the upcoming season – an increase of 14% year-over-year – it created a distinct buzz. With clients asking the impact on the US market should such an occurrence come to pass, we thought it would be helpful to put the estimates in context – particularly in light of the fact that it was a 10% surge in New Zealand production in 2008-2009 that played a key role in driving US prices from the 2008 highs to the 2009 lows. Even if the 14% increase doesn’t come to pass but instead the gains are in the 8-9% area, New Zealand production still represents a significant headwind to meaningful price recovery in the US.
Little Fun Here…Even Less With Hugo
The slog continues: an economy with unemployment stubbornly near 10%, ballooning government balance sheets and pervasive unease. From a consumer – and by extension dairy product demand standpoint, little has changed. It is still all about cautious spending, heightened price sensitivity, and slow, uneven growth. It was once believed that lower gas prices would amount to a tax break and result in increased spending in other areas, but that has clearly not been the case. Against this backdrop, it is not surprising to see that restaurant spending continues to be lethargic – with ongoing implications for dairy product demand. And then, just when all seems on the path to lost, a comparison to what real trouble looks like – Hugo Chávez’s Venezuela.
