The start of each new year brings uncertainty about what lies ahead. Like being in front of cows or behind them, how things look depends upon your perspective.
For dairy producers, 2016's outlook may boil down to what they think is "normal" anymore. For instance:
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- There is probably no one who thinks $22-plus milk in 2014 or $11 in 2009 were normal. But was $15.80 in 2015 normal? An even better question is, is there any such thing as normal milk prices anymore?
- How do we define what normal is for U.S. dairy product exports? Five percent of total production (solids equivalent) was normal for several years, then 9 percent, and then 13 percent. Fifteen percent was easy to get used to lately, but then that dropped to 14 percent in 2015.
- It has also become clear that $7.50 corn, $15 soybeans and $9 wheat were aberrations. But are $3.50, $9 and $5 prices normal? Are they what you are counting on?
- Were $1-plus per pound cull cow prices normal or just great fun while they lasted? Are we heading back to the longtime normal of 50 cents or less?
- Were $500 day-old bull calf prices normal? Is $80 now? Does either of them really make sense? What are you planning on this year? I'm pretty sure a lot of producers were able to breakeven in 2015 because of beef and calf prices, but they won't be much help in 2016.
- Was $4.50 diesel normal? Organization of the Petroleum Exporting Countries (OPEC) is in a mess right now, so $2.60 might be normal for a while.
- How about near zero interest rates? Lasting for seven years doesn't make them a new normal does it?
- Seventy degrees in New York on Christmas and 2 feet of snow in eastern New Mexico? Four years of drought in California? El Niño? None of those are normal either, but they do remind us that the biggest danger in planning is what you don't see coming - and there always seems to be at least one of those each year.
(c) Hoard's Dairyman Intel 2016
January 4, 2016