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Dairy outlook bullish through 2022

JW LTD/Getty Images Dairy cows in field
RISING PRICES: Economist Ben Buckner says butter and cheese markets are reaching all-time highs. “I don’t think we have seen a high in dairy markets yet,” he says.
Dairy Outlook: The war in Ukraine is stripping the world of feed supply.

The fundamentals of the U.S. dairy industry are improving because our foreign competitors aren’t producing as much milk as they were a year ago. The deficit is going to get wider, according to Ben Buckner, chief grains and dairy analyst for AgResource Co. Buckner spoke March 3 during a Professional Dairy Producers Dairy Signal webinar.

“U.S. dairy exports will stay record large in 2022,” Buckner said. “I think we will set new records this year. That’s important because we will be able to sell milk at much higher prices and clear excess inventories.”

War impact

Buckner said the war in Ukraine is impacting feed and energy supplies and prices.

“The world is more or less at war with Russia, so that impacts grain flows first and energy flows as well,” he said. “The trade flows of food are being reset for the first time in decades.”

According to Buckner, the super cycle in grain will continue as record demand growth collides with record South American yield loss due to drought and the loss of Black Sea corn, wheat, crude oil and vegetable exports for an unknown period of time.

“The duration of the conflict is critical, but a resolution is unlikely as long as Putin is in power,” Buckner said. “The Russian economy and trust are ruined for the foreseeable future. I don’t think Russia will surrender anytime soon, so I think this war will be prolonged.”

With record consumption at home and abroad, Buckner said we needed to have record grain production in both hemispheres this year and no disruption to grain exports.

“Both of these have occurred, so I think this will extend this super cycle another 12 to 18 months,” he said.

Silver lining

Buckner said the silver lining in all of this is the positive impact it is having on dairy.

“Global dairy balance sheets continue to tighten,” he said. “There is still no indicator that output is expanding in Europe, New Zealand, Australia, the U.K. or the U.S.”

He said the global dairy markets are testing 2013-14 high prices for milk and dairy products.

“Butter and cheese markets are reaching new all-time highs,” he explained. “I don’t think we have seen a high in dairy markets yet.”

U.S. cheese and butter are still reasonably priced on world markets.

“There really is no reliable place to get reasonably priced whey, cheese, butter and powder other than the U.S.,” Buckner said.

He predicts that during the next eight to nine months, dairy export markets will be very robust.

“All markets are searching for prices that slow consumption, which is very difficult to do, and assure record production,” Buckner explained. “Milk prices are challenged by rising feed and surging transportation costs. And drought will persist across much of the Western U.S.

“What’s unique about this year compared to the last five years is, we need more dairy production. Dairy markets have to keep pace with rising feed prices. The market must encourage profitability, at least in the short term.”

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