Is Dairy’s Problem Over Supply or Under Demand?
Economics 101 includes supply—how much of something you have—and demand—which is how much of something people want. When it comes to dairy president of Ever.Ag Insights, Phil Plourd, shared at the 2023 Milk Business Conference in Las Vegas that we don’t have oversupply, but we do have a lot of under demand that is holding the markets back.
“I don't think the supply is going to get any better anytime soon,” he says. “But the demand has to pick up if we're going to see some fireworks.”
Lucas Fuess, a senior dairy analyst with Rabo AgriFinance concurs.
“If you look at the health of the consumer in the U.S., and if you look at our foreign markets, which are a big share of where we're exporting. Almost 20% of our product is seeing signs of worrying demand all around the world,” he stated at the Milk Business Conference, adding that when you look at the U.S., the European Union or New Zealand, we don’t have a burdensome oversupply.
Dan Basse, President of AgResources Company, notes that 2024 will be the year of protein and says he believes the prices will retreat.
“I'm bullish on protein. I think milk protein could have a place at the table, but we need the powder market to come along. That's something I would watch very carefully in the first quarter,” he says.
Fuess shares that record-high prices at retail don't help from a consumer perspective, sharing that consumers are not stocking up like they once did.
“There's less pantry stocking today. And so instead of buying three pounds of butter because it's on sale, they might be buying only one or two,” he says.
Fuess is concerned about the cheese side of the equation, sharing that typically we see seasonally high prices for the quarter.
“We just haven't been able to get traction on cheese which is a little bit concerning to me,” he says.
Plourd adds that the consumer is strapped with student loan payments, reduced benefits and a higher interest rate on loan items—all impacting their pocketbook.
“If you look at the big three pizza companies - none of them had a great third quarter. I think that the consumers just backed into a corner and they're dialing their spending down,” he notes.
