Rabobank: U.S. dairy price cycle no longer exists
What has become the standard ebb and flow of U.S. dairy prices may very well be coming to an end, according to a report released by Rabobank’s Food & Agribusiness Research and Advisory (FAR) group. The report, titled “Dysrhythmia,” predicts the U.S. dairy market can no longer depend on the predictable market cycles it had become accustomed to in the 1990s and through the mid-2000s, noting the U.S. global presence and volatile feed costs will continue to create an unpredictable marketplace.
The U.S. dairy industry has ended a decades-long period of isolation, as the explosion of prices on the world market encouraged the U.S. to begin supplying large volumes of exports – quickly bringing the U.S. and international dairy prices into alignment. With an exposure to the world market comes extreme diversity and volatility – including factors such as income growth in the developing world, dietary shifts, product contamination, shifting regulation and currency strengths in import regions.
The report also notes that producers continue to face volatile feed prices, that make less regular dairy price cycles even more difficult. Since 2007, feed prices have shifted to a higher trading range and now short-term shifts in the cost of feed do not necessarily track those of milk prices – with revenue and costs moving in the opposite direction at times.