Even though costs, especially feed costs, are climbing, so are milk prices, and the prospect of higher milk prices have put many dairymen and their suppliers in a more positive mood. That is evident in the hallway discussion at the 10th bi-annual Western Dairy Management Conference being held this week at Reno. Registrations at the WDMC topped 1,550 which represented a jump of at least 150 from 2009's conference.
A couple of early speakers at the conference added more reasons to be in a good mood. Tim Hunt, Global Strategist for Dairy with Rabobank, predicted that producer milk prices would be "extremely high" during 2011.
Hunt painted a picture of strong global dairy demand, an improving world economy, China's great appetite for imported dairy products, and Russia's 2010 drought that resulted in the slaughter of a large number of dairy cattle in that country. Foot and mouth disease in South Korea has resulted in the killing of many dairy cattle there adding to the need for dairy imports to that country and others in Asia. India, the number two cows' milk producer in the world, has run short of dairy products and issued a ban on exports of dairy products and has relaxed import limits.
In volatile North Africa, Hunt believes governments will begin to purchase (import) dairy products and other commodities. They will do this in an attempt to keep food prices in their countries from raising which likely would result in even more political unrest than currently exists.
All of these conditions brew up a mixture of great global demand for dairy products, including those from the U.S. At the present time, U.S. dairy product prices and world prices are about the same. Given that, and the relatively weak dollar, the U.S. is in a position to export significant amounts of dairy products at attractive prices.
Phil Plourd, president of Blimling and Associates at Cottage Grove, Wis., also spoke of the likelihood of high milk prices in the U.S. during the rest of 2011. He referred to limited growth in milk production in New Zealand because of drought. Australia, another dairy exporter, has had flooding.
Plourd referred to the drought in Russia last year as the trigger that moved the world from food "plenty" to food "scarcity." Around the world, butter and milk powder supplies are tight. The grain market is exploding which will limit milk production through higher feed prices. Plourd also said that we may not have the current glut of heifers as we move into 2012 and beyond because people essentially quit using sexed semen during 2009. Also, because of credit limitations he doesn't expect to see a lot of expansion of U.S. dairy operations. His group's estimate of milk production during 2011 is just 1.5 percent.
