Hot temperatures continue to bring stress to dairy herds across the country. With only short days of reprieve, the forecast seems to be never ending waves of heat. To a cow, this can quickly zap excess energy, limiting the pounds of milk she is able to produce. To the market, this is a disruption in supply that can bring summer fireworks under the right conditions.
This year, a drop in milk production is barely noticeable with the impressive amount of production we’ve been able to maintain nearly all year. There is no shortage of milk available in the market. Cow numbers are climbing; milk volume produced per cow is high. So, a few weeks of heat isn’t going to cause massive rallies and fear of the supply chain, but it may be the catalyst for price support the market needs.
Demand Opportunities Build Into Fall
Domestic demand is currently stable with food service holding steady despite consumers feeling the pressure on their wallets. Exports are strong with interest in markets outside of our normal buyers. Innovation is seen in nearly every advertisement looking for healthy protein choices, many utilizing dairy powders and cheese. There is no shortage of demand, and I would argue that some are here to stay as consumers have begun to rely on nutrient dense protein and healthy fats that only certain dairy products can provide in an easy, on the go solution in today’s diet culture.
There is more demand to come on the nearby horizon. Schools prepare to open in the upcoming weeks, which always brings a wave of fluid milk demand for bottling. This year will be different though. If you remember from earlier this year, President Donald Trump signed a billed overturning Obama-era limits on higher-fat milk options called the Whole Milk for Healthy Kids Act. This will allow whole milk and 2% milk options back in schools alongside the skim and low-fat options which were the only options allowed since 2012.
While this bill was signed months ago, this fall is the earliest chance for the new choices to be available to students, with experts citing that some schools may take longer to implement due to expected struggles in gauging interest for full fat dairy and adjust supply chains. This change affects 30 million school children that participate in the National School Lunch Program. While the full change in demand may take years as students adjust to their new choices, it is a big win for the dairy industry.
Beyond schools returning back into session later this month, the holidays are right around the corner and buyers will soon begin preparing for holiday demand. It is an exciting time for dairy demand and even the heavy cloud of excess production can’t stop the producer from seeing the light on the horizon for hopefully many years to come.
Sarah Jungman is a commodity broker with AgMarket.Net and AgDairy, the dairy division of John Stewart & Associates Inc. (JSA). JSA is a full-service commodity brokerage firm based out of St. Joseph, MO. Sarah’s office is located in Winterset, Iowa and she may be reached at 515-272-5799 or through the website www.agmarket.net.
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