Cheese wedges.
October 23, 2018

Global Dairy Outlook: ‘We’re moving in the right direction.’

 |  By: Jim Dickrell

Though dairy and milk prices aren’t expected to skyrocket next year, global market conditions are pointing up. “We’re moving in the right direction,” says Mark Stephenson, a University of Wisconsin dairy economist.

 

He and fellow economist Bob Cropp say world milk production is slated to increase slightly next year, but current projections show it growing just 0.8%. Europe is only up a bit and Australia is suffering a severe drought. New Zealand has started off its production year strong, but has a long way to go. “The U.S. is leading the pack, but not by much,” says Stephenson. See September milk production report here. 

 

The other good news is that the European Union is continuing to sell off its huge stocks of milk powder. By the beginning of 2020, those stocks might finally be cleaned out. All of that points to better news.

 

There’s other good news. Whey stocks in the U.S. are down some 20% since the beginning of 2018, which has meant whey prices have more than doubled, moving from 25¢/lb to 57¢. That price move alone has added $1.50/cwt to Midwest milk checks, says Cropp.

 

And then there is cheese. Over the past 50 years, per capita cheese consumption has tripled, going from 11 lb/person in 1970 to 37 lb to day. “Per capita cheese consumption has grown a half pound per person per year, which is a 2.5% compound annual growth rate,” says Stephenson.

 

Cheese has gone from 25% of all U.S. per capita dairy consumption in 1970 to 58% today, he notes. “And if you look at that graph [of growth], it doesn’t look like we’re running out of steam,” he says. Countries such as Germany and France consume 50 lb of cheese per capita, he notes.

 

In the short term, U.S. exports will be critical to milk prices. Despite the tariff war, world demand looks to be strong. “China is the trump card,” says Cropp, with no apparent pun intended.

 

Both he and Stephenson expect prices to improve in 2019. He still sees Class III prices in the $15s in the first quarter, moving up into the $16 range later in the year. For the year, both economist expect prices to average about $1.25 higher than 2018. “2019 definitely will be better,” says Cropp.

 

You can listen to the entire 13-minute podcast here.

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