Why is it so difficult to have a trusted forecast on how the dairy industry is likely to perform going forward for just one year at a time?
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This article is for interest only and is not to be relied upon.

The industry needs long term stability and for this we need consistent accurate factual predictions and not heresay. The global dairy market is huge and with continued population growth then dairy is with us for the long term.

It can be extremely unhelpful for dairy farmers, dairy manufacturers and dairy investors to be given a very positive outlook only for prices to drop and no consequence from those that made the prediction – keeping their heads low.

Is the pressure for adding subscribers and advertising revenue resulting in quotes from organisations that may have a self interest in a continual positive spin and raising expectations.

Creating “clickbait” articles – with attention grabbing headlines.

Headlines such as:

“Rural Bank is forecasting 4-5 per cent higher farmgate milk prices and increased dairy exports in the second half of 2021.”

“Milk prices now in a ‘super cycle’, says ADPF head”

“Dairy’s “general good feeling”, as farmers spoilt for choice”

Do journalists take sufficient responsibility for the impact of their reporting by quoting others and including statements from those making the news to cover their asses?.

Statements like:

“so and so says”

“I think” the future is good

“We need” the milk price to grow

“He hoped” the milk price would rise

All this gives a positive spin but does it do the industry more harm than good?

The table below shows an estimated 15% jump in Dairy Prices in March 2021

Global Dairy Trade - Dairy Commodity Prices graph July 2021

In my view dairy prices had dropped to completely unsustainable levels and compounded by increased milk production as a result of milk quota removal, the Russian embargo on EU Dairy Products and China buyers reducing stock levels (and other factors) which were all putting pressure on the price to go down. If it were not for a significant farm gate milk price increase then there would have been an exodus from the industry.

The downward milk price cycle is usually triggered by low farm gate milk prices resulting in farmers culling cows / leaving dairy which then later results in too little milk supply and manufacturers going out of business due to increasing competition for the available milk. The pendulum swings compounding the uncertainty for farmers, manufacturers, consumers and shareholders.

The est 15% increase in March 2021 – comment

The increase was in my view as a result of a concerted effort by major global manufacturers to reduce stock levels and force the price upwards before too much damage was done to the farming industry (reduced milk production) Supply and Demand.

Do we need a more reliable ongoing predictor for the global dairy industry and not just clickbait journalism?

 

THE Dairy Industry Code of Conduct has brought about a “significant culture change” within the dairy sector and helped increase competition at the farmgate, according to Australian Competition & Consumer Commission deputy chair Mick Keogh.

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