December 22, 2017

The Grinch Didn't Steal Everything This Christmas

 |  By: Mike Opperman

Just as the citizens of Hooville survived the Grinch stealing everything happy and good about Christmas, there is hope for dairy producers going into 2018 despite a dismal and bleak price forecast. Here are a couple of rays of hope:

Milk production continues to slow. November U.S. milk production fell short of expectations and is at least growing at a slower rate, bouncing around 1% growth rather than the 2 to 3% growth seen in previous months. In addition, as pointed out by Nick Buyse, risk management consultant with INTL FCStone Financial, the latest season production estimates from New Zealand have slowed as well. Even though prices haven't reacted to this production slow down - in the U.S. or globally - that's at least a small present instead of a lump of coal.

Business will expand. Buyse says the new tax bill passed this week will open doors for more business expansion and the repatriation of funds in early 2018. "U.S. economic growth is approaching 3.5% in 2017 with no signs of that rate slowing in 2018," he says. "Global GDP growth is also much stronger that in the past 10 years. Top that off with historically low unemployment and accelerating pace of technology and you get a recipe for a rather bright 2018 economic outlook."

So, Buyse asks, are we becoming too focused on overproduction and lack of demand? "We can't ignore the markets," he says. "But there is an important concept to consider . . . in boom economic years, on-farm income also booms. This may mean stronger commodity prices - including milk prices - than are expected in 2018." 

So there's a nugget of hope for your Christmas stocking.