March 28 2016 08:09 AM

Long-term growth and short-term fluctuation are the new norm for commodity markets.

In Kansas this past weekend, my relatives woke up to a blanket of snow. Almost 3 inches fell there overnight and greeted early risers on Easter morning. Well past the months they are used to seeing a few inches of snow, it was an odd sight for my parents, but also not completely surprising. It is, after all, Kansas in spring, a season there that can see an 80°F day followed by snowfall making its weather patterns at least as variable as commodity markets over the last several years.

But just as my parents have grown accustomed to the ups and downs of Kansas weather, the dairy industry is adjusting to the new global standard of variability in markets.

Managing the fluctuations of the milk markets was top-of-the-mind at the recent annual meeting of the Professional Dairy Producers of Wisconsin and especially during Allan Gray's presentation "Cash-in: Strategies for Capital Success." The Purdue University professor of agricultural economics and director of the Center for Food and Agricultural Business drove home the all-important message that variability is the new regular for commodity marketers.

"Income growth will have more effect on demand than population growth," he reminded the crowd. "Markets rely on global income growth, which fluctuates from year to year."

Although income growth is expected to continue throughout the world and areas such as India are expected to be major players, Gray expects long-term growth and continued and more volatile fluctuation.

He challenged the room to pay attention to global income trends and left the group with six ways to work toward managing the environment.
  1. Lock in margins.
  2. Buy crop insurance.
  3. Consider fixing some interest rates.
  4. Pay down debt during good years.
  5. Hold financial reserves creating liquidity.
  6. Make investments in operational excellence.
Nothing new to the business-minded dairy producer, but an ever-important reminder just the same that preparations when it's nice outside put you in your best situation to weather the moody, but yet expected ups and downs of the weather and the markets.

And remember, even though it snows overnight, it can still make it to 60°F by 2 p.m. Just ask people in Kansas.
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The author is an associate editor. She covers feeding, milk quality, youth activities and heads up the World Dairy Expo Supplement. Maggie was raised on a 150-cow dairy near Valley Center, Kansas, and graduated from Kansas State University with degrees in agricultural communications and animal sciences.