Harvey to Hit Dairy Prices
Hurricane turned Tropical Storm Harvey is not likely to impact milk production, but it is still bearish for dairy prices.
The hurricane, which first made landfall on August 25, devastated Houston and surrounding areas of South Texas. While there aren’t many dairies in the area, despite Texas being the 7th largest milk producing state in 2016, the impact the storm will have on demand for dairy products will continue for months to come.
The storm has disrupted consumption habits as people take refuge in shelters and flee the region to stay safe.
“Roughly 13 million people are in counties with flood watches or warnings,” according to INTL FCStone’s Udder Intelligence Report. “There are already 13,300 people in official shelters, and that number is expected to rise to 30,000.”
The report says Harris County, home to 4.5 million people, was estimated to be 25-30% under water on Tuesday afternoon. For displaced people, consuming dairy products is probably low on the list of priorities. FCStone anticipates those in shelters are not consuming as much dairy as usual, however, those living in hotels are likely consuming restaurant food which tends to be high in butter and cheese. Those who left the region before the storm to stay with family and friends, likely haven’t changed their consumption habits.
“The net impact to dairy consumption is likely to be negative short-term,” the report says.
FCSTone looked at dairy price data following several previous hurricane. The pattern is clear, prices drop following a storm. However, it’s important to consider the factors after each drop. Following Katrina, they say the fall in price was because of oversupply. Following Hurricane Ike, the global financial crisis can be blamed for prices. Sandy, which saw the most gradual decline can be blamed on several other factors they say.
According to the report, “the net impact from Harvey is probably small, but bearish.”