August 22, 2014 — The sky is not falling, yet. That’s the takeaway from my discussion in Friday’s DairyLine with Jerry Dryer, editor of the Dairy and Food Market Analyst. I asked if “Chicken little” was right.
He admitted that U.S. dairy cows certainly did make a lot more milk in July due to ideal weather and an improved feed supply but he’s not convinced the sky is falling just yet.
He pointed to trading at the Chicago Mercantile Exchange since the Milk Production report came out and, as of Thursday morning when we recorded our chat, he reported that all of the Class III futures were “green, the cheese price keeps ticking up, the butter price keeps ticking up so, given the demand situation and the inventory situation, the sky isn’t going to fall immediately.”
Prices will fall, Dryer admits, but he doesn’t “see the sky falling.” He predicts that the fall will come in early Fourth Quarter, “simply because inventories are as low as they are, particularly on the butter side, and we’re even pulling pretty hard on cheese right now, the holiday season is coming at us, and the rubber doesn’t really hit the road until everything shakes out relative to this Russian ban and European cheese starts seriously seeking a home in world markets.”
When asked about his stand in the past that the U.S. had not necessarily priced itself out of the world market, he qualified that because he said the U.S. was “the only game in town. We were the only really good source of cheese as the Europeans committed huge volumes to Russia, which effectively took it out of play in many of the markets where we compete, like the Pacific Rim countries, Mexico, even the Middle East and North Africa. But, now with that Russian kickback, we’re going to have to compete with the Europeans. That will change the scene a little bit but we can still be competitive,” he concluded.