The demand for dairy is evident and the current robust milk futures market has taken notice. Mike North, president of talked to AgriTalk host Chip Flory about the dynamic dairy market that both the domestic and global demand for U.S. dairy has created.
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Current prices are hovering around record levels, which Mike North states is still relatively cheap to the world market. (Farm Journal)

North states the world is hungry for dairy right now.

“The demand is there and it’s not just domestic and global, we continue to pace well ahead of some of our highest export months ever, we’re moving a lot of products out of the country, not just in the Asian market,” he says.

Looking to our neighbors to the north and south, both Canada and Mexico are purchasing dairy products, with Canada purchasing butter and Mexico buying a noticeable amount of cheese powder.

“The world is really hungry for dairy right now,” North says. “The unfortunate part is production worldwide has been more limited. And when you look at U.S. prices, even when you consider the pain in the butt that our ports have been, we are the cheapest price on the block.”

Current prices are hovering around record levels, which North states is still relatively cheap to the world market.

“There’s a big gap to fill, especially on cheese, trading cheese right now about $2.40 on the exchange and the world market is trading around $3/lb.,” he says. “So, lots of room there. And, if we continue to see that demand, milk prices will remain strong for a while.”

Portable Protein Demand

Both New Zealand and Europe are ultimately the primary sources for Asian dairy demand, according to North. He shares that when you look at their milking season, cows start to freshen around August and then they basically milk them into about June and then reset before doing it all over again. Last year pasture conditions went from wet, to wetter and then they were never able to maintain good pasture quality and production, consequently dropped off.

“Remember, New Zealand is just a couple of islands, and they don’t have the space that we do. And there’s growing demand out of Asia for beef. And so that’s been competing for pasture space,” North says. “And it’s been harder and harder with some of the environmental rights to expand the dairy industry.”

Factor all that in and New Zealand’s production has been squeezed, and that’s also been seen in Europe.

“Issues with their weather and issues with their feed and other countries, like the Netherlands have passed sweeping environmental reform that has really constrained the dairy producer’s ability to maintain count numbers going forward,” North says. “So, you shorten up the three largest milk pools in the world, us being the third one in that trio and ultimately, prices just start getting squeezed.”

North explained that as developing countries demand protein, they look at other factors, such as refrigeration needs and portability.

“You and I enjoy a good steak,” North told Flory, “But that needs refrigeration. Dairy proteins are much more shelf-stable; you can move whey powders and milk powders into places where there is no refrigeration, and it keeps and ultimately, that is where some of that demand comes from.”

Higher prices domestically have caused a yellow caution flag, according to North and he shares that the demand for butter has shown a dip.

“Bottom line is that we’re seeing a little bit of less movement on retail [butter] prices have gotten high enough now where people aren’t thrown into the grocery cart as readily as they were before,” North reports.

However, cheese demand remains strong across all categories, as are higher protein whey products.

“New Zealand farmers will be happy with this result,” said NZX dairy analyst Alex Winning.

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