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Post by jrtheoriginal on Aug 28, 2011 7:00:29 GMT -5
I was going to post this on the dairy side as we have had several discussions concerning the future dairy price and how it may slide lower with these new financial worries. I do not believe that dairy will slide lower and that goes for the values added ag commodities as well as the grains.
In 2008 we had at this time a very strong dollar as compared to today. and we had weakening Gold and all other commodities were in a steady sell off. Corn had peaked in June and had slid down to have lost half of it's value by the time Sept. was over. Milk was falling out of bed we just didn't realize how bad. We knew exports were getting beat up but didn't realize the severity.
Gold had lost 200 dollars in about 2 months.
Look at this time around. since July gold is up 24%! The corn market is flirting with a supply problem and a monetary problem. I do think we can move higher from here. But I also think that Milk is gonna be faced with the same dynamic. A supply problem here along with our weak currency will allow folks over seas to purchase our products at values relatively cheap as compared to their currency. The currency exchange is gonna hurt importers and therefore will keep foreign dairy products at a disadvantage to our products. We have a supply issue that few are willing to recognize and that few will grasp till it is all over. We have a firm floor now at the $17.50 range (I thought we would floor at $18). Corn hasn't tried to find a floor so who knows right now where that is.
But the interesting thing is that oil consumption will go down as consumers spend more on food. So it may actually keep oil from spiking. I think for the most part that oil price has largely been a function of the dollar trade.
The bad thing is gonna be that we will see interest rates really start to rise going forward. The feds statement of zirp is gonna actually fuel interest rate hikes. They have already increased by a large percent just since June.
Just a few thoughts before I run out to chop this morning. What does your crystal ball show?
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Post by linsal on Aug 28, 2011 17:43:59 GMT -5
I really wonder what is going on at the CME...it appears that Kraft is still trying to sell, but others stepped up the last couple of trading sessions to prop up the price. If true, then that tells me there isn't as much cheese to be had as some would make us believe.
I also wonder how the seemingly ever-expanding financial crisis in Europe is going to play out. The dollar is slowing loosing value with Bernanke's constant twiddling, which should make US cheese more attractive on the global markets. But then throw in the EU crisis, and I wonder how long our idea of "credit" is going to exist? Will US sellers trust anyone unless they've got cash up front?
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Post by jrtheoriginal on Aug 28, 2011 17:58:07 GMT -5
Linsal, the skinny on Kraft is that they are broke and are trying to get their finacial balance sheet to look better by selling cheese now that was produced at the beginning of the quarter with cheaper milk. by doing that they generate cash that they have none of. BUt your final conclusion is right there isn't the cheese and more importantly there isn't the butter! Put all this together and you have the recipe for the shoot the moon prices!
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Post by 3020 on Aug 28, 2011 21:12:06 GMT -5
The thing to remember is nothing is ever worth any more than what some one can afford to pay for it.
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dman
FFA member
Posts: 63
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Post by dman on Aug 28, 2011 22:20:23 GMT -5
Well said 3020!!!!
JR, at some point Dominoes, Pizza Slut and the like will CUT back on the amount of cheese of their pizzas, much like they did in '07-'08. If people do not come thru the door they will cut until they can get them in the door. Talked to the manager of a restautant today, they have not really increased their prices to much. They have absorbed some of the increase in the price of food they buy, but they soon need to raise prices. What happens when/if prices shoot the moon? Anyones guess, but I'm betting most can not handle a huge increase in food costs.
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Post by glowplug on Aug 28, 2011 22:30:04 GMT -5
Your post makes a lot of sense dman. The consumer is very price sensitive in a down economy. Consumers will eat at home, and that is a disaster for restaurants. Pizza consumption declines and the cheese market will take a crap.
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Post by jrtheoriginal on Aug 29, 2011 4:35:59 GMT -5
The thing to remember is nothing is ever worth any more than what some one can afford to pay for it. I agree but here is the question. What is someone who is hungry willing to pay for food? I have said it before in 2008 we lost our exports because the dollar strengthen so much as compared to other sources of milk that the cheaper supply was bought first. World wide we actually used more milk than we did in 2007! IT was just that we had the ability with relatively cheap feed to overproduce as compared to demand. WE DO NOT HAVE CHEAP FEED ANYMORE! Also we have a much weaker dollar which makes the world look at us as the discount warehouse on everything. The end result is that we really have a world wide animal that is much different than the old one. DMAN is right restaurants and grocers have not passed on the cost increases. Talking to a friend of mine who works for a suppermarket chain a couple weeks ago he told me that in the end these costs are going to be past on and that usually grocery stores have the majority of the retail price hikes after labor day. Because people are so focused on school and the after vacation schedule they seem to absorb those increases better. I also just believe that there is a balancing that always occurs and that balance is about to be achieved by meat milk and eggs going higher in relation to feed. BTW dman I missed the floor by 50 cents. I said 18 and we stopped at 17.48. Still not to far off as to a guess I think! |
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Post by jrtheoriginal on Aug 29, 2011 6:52:17 GMT -5
World Top 10 Cow's Milk Producing Countries in 2009(Tonnes)
2007
2008
2009
USA
84,189,067
86,159,600
85,859,400
India
43,481,000
44,100,000*
45,140,000
China
35,574,326
35,873,607
35,509,831
Russian Federation
31,914,914
32,099,700
32,325,800
Brazil
26,944,064
27,579,400*
29,112,000
Germany
28,402,772
28,656,300
27,938,000
France
24,373,700
24,516,300
23,341,000
New Zealand
15,618,288
15,216,800
15,400,000
UK
14,023,000
13,719,000
13,236,500
Poland
12,096,005
12,425,300
12,447,200
World
571,403,458
580,428,259
583,401,740
Just thought this was an interesting chart on world milk production. BTW look at brazil. THey have had a very high support price that has fueled their expansion. That may be ending soon.
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Post by jrtheoriginal on Aug 29, 2011 7:00:25 GMT -5
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Post by glowplug on Aug 29, 2011 7:55:40 GMT -5
Well jr, I've always said the correct answer to the 1970's US domestic milk over production was increased cheese consumption.
Instead, Cong. Jim Jeffords dumb brainfart was the Whole Herd Buyout, a disaster for Upper Midwest dairying because milk production shifted to California where they don't know how to make quality cheeses. Consumers buy what tastes good, (lite beer is the exception).
Sadly, there's so much mediocre cheese out there, that consumers don't know what excellent cheese tastes like anymore. We have dumbed down taste buds.
The practice of importing NZ and other nation's MPC by processors looking to spike the cheese vat with cheap filler, results in sucky cheeses. Consumers don't fall in love with the taste, therefore they buy less cheese. It's going to take a lot of effort to educate consumers to what excellent cheeses taste like if they just buy cheap cheese.
Worse, there's a lot of pizzas topped with mediocre cheeses. Consumers would eat more cheese if the end product tasted better.
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