The Western Dairy Management Conference always attracts some of the brightest people in the dairy industry. This year was no exception.
Waiting in the airport for my flight home, I took a few minutes to reflect back on what I had learned. I already knew that the dairy industry is affected by global events, but this conference reinforced it in a big way. (And, certainly, the tragic events in Japan, following that country’s massive earthquake and tsunami. What is happening in Japan will have a huge impact on the grain markets and other economic activity.)
One of the speakers at the Western Dairy Management Conference made it clear that the milk-price rally during the early part of this year was based primarily on world events.
“This (price rally) had little to do with the U.S. dairy industry and a lot to do with what is happening beyond your shores,” Tim Hunt, global dairy strategist for Rabobank, told the audience on March 10.
And, China has certainly been a factor.
I was amazed at how much of my trip to China in September 2008 came back to me. Our group went to one of the most modern dairies in China, located near Shanghai, but the vast majority of the dairies in China are small dairies without modern barns or facilities. Many are located near Mongolia. So, it was interesting to hear Hunt describe his trip to China late last year. He said it was phenomenal to see the dairy expansion that is taking place. People are building free-stall barns, importing alfalfa hay from California, and also importing semen from AI sires. The country is working hard to revitalize an industry that was severely harmed by the melamine scandal. But it will take a long time to recover. Chinese consumers may always have the suspicion that milk products produced in foreign countries are safer than their own.
There is obviously an opportunity for the United States here.
But, Hunt pointed out, the U.S. needs to do a better job understanding the exact specifications of foreign buyers. (I recall sitting in on a discussion between U.S. dairy officials and representatives of a large beverage manufacturer in China where the quality assurance director for the Chinese company was critical about the uneven quality of U.S. milk powder shipments.)
Another speaker at the conference agreed that the current milk-price situation in the United States is based largely on international events. “This is much more of an international story than a U.S. story,” said Phil Plourd, president of Blimling and Associates.
To have this confirmed by two knowledgeable speakers made an impact on me.
When there is political unrest in the Middle East, it has a big impact on gasoline prices. When there is a drought in Russia or New Zealand, or continued economic recovery in the world’s developed countries, it has a big impact on milk prices.