Consumer Plays Role In Dairy Outlook

Demand is looking good for dairy products and the dairy margins are looking good for Wisconsin producers. But this is all subject to change, according to the experts. principal Mike North tells the Mid-West Farm Report about how consumer demand plays a huge role in dairy’s strength, and how to protect yourself in case the good demand story changes.

During the pandemic, butter and fat demand was driven out of the food service space and into the home. But even with that strong retail support, butter retail demand has been declining, says North. He explains today, as we experience $5 gasoline in areas of the Midwest, it puts questions around butter demand because transportation costs are up.

Cheese consumption remains strong even as prices climb. Historically, consumers start to push back on prices at around the $2.50 point. As of the close on Thursday, April 7, from Chicago the 40-lbs block was $2.31, and the barrel was $2.31 and a quarter. 

Eighty-five percent of milk is consumed in-country. And American consumers, according to Mike North’s consumer sentiment research, are concerned about the future. This may impact demand, and therefore prices, and is a note of caution for producers. 

North’s message to producers is to be cautious despite the optimistic prices. He says the 12-month, forward-looking, profitability curve is the highest in history. The longevity of these high milk prices is unknown, so producers need to protect that, North adds.