Dairy faces a number of challenges as the rest of the year develops. While that is true, every other food commodity market has similar struggles. Take for example oils that are used to make margarine. Their cost run on food grade has caused margarine prices to grow more rapidly on a percentage basis than butter prices.
During the April 27, 2022, Hoard’s Dairyman DairyLivestream, panelists explored their predictions for dairy markets in the rest of the year.
“Ultimately, that's going to be a macroeconomic question,” shared Ted Jacoby, who is the CEO of T.C. Jacoby and Company. “I would start with the question of how well is our economy going to hold up between now and the end of the year? And I think it's probably going to be fine. But, I don't think we're going to see the kind of demand that we've seen in the last six months over the course of the next six to nine months.”
While Jacoby does not see as strong of demand for the rest of the year, he still anticipates dairy supply constraints to buoy prices. On the grocer and consumer side, Kroger’s Mike Brown described his perspective this way.
“When you look at that variance, it isn't even,” he explained. “We generally think there's a lot more risk of that big pop up than a lot of relief on the downside, which affects our strategy. It also makes decisions to forward buy at a price we think may be a little bit elevated because we think the opportunity or concern on much higher prices is big.”
Dairy remains competitive
Brown said they are monitoring how dairy is doing in comparison to other commodities particularly other protein groups.
“I think dairy is very competitive from the standpoint of what we give the consumer for the price. That will continue to help us through the fall, and we're pretty confident dairy may decline a little bit but it's going to be fairly stable,” he said.
Cornell’s Andy Novakovic concluded the comments on the 2022 dairy outlook by looking at predictions for consumer use.
“I think how well we support low-income households through government programs is going to make a pretty darn big difference in all of this,” Novakovic shared. “Fast food and other limited-service restaurants have a host of problems and their prices are inflating more so than full-service restaurants. I think what that's going to do is pull back more people eating at home, eating at home favors milk consumption.”
To watch the recording of the April 27 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 from the Hoard’s Dairyman website.
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