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A Great Dairy Reset is Happening in 2023

A Great Dairy Reset is Happening in 2023

By karen Bohnert

The rollercoaster of the dairy industry certainly isn’t new. History illustrates the constant up and down cycle and shows the need for strong global markets. However, Jacob Shapiro, a partner and director of geopolitical analysis for Cognitive Investments (CI) shared at the PDPW Business Conference in the Wisconsin Dells that down the road, there won’t be one global market for producers to sell into. Instead, numerous potential trade markets will be the way of the future.

“We're going to see different spheres of political influence around different powers,” he says.

Dan Basse, president of AgResources Company, told the PDPW audience last week that a great reset is underway for the dairy economy, which will spell a more competitive world market.

 

 

“The U.S. is no longer the center of the world in terms of the availability and increasing supply,” Basse said, noting that over the past three years, China and the U.S. have been walking in lockstep.

Embrace Opportunity

U.S. dairy producers need to continue to lean forward at the opportunity. Basse says one big opportunity that producers can capitalize on is beef-on-dairy. While he understands that many producers are already utilizing this tool, he encourages producers to do more.

“We all need to be doing our share in bringing food to the table because America is going to be needing this long term,” he says. “63% of net farm revenue is money that you keep which is determined by the decisions you make in the markets.”

2023, A Less Profitable Year

 

 

As most producers have already felt the tides changing, 2023 will likely be a challenging year. And economists like Basse say it will be a less profitable year, too.

“USDA projected that producers will be making less money this year. A 16% decline because of the rising costs and falling prices,” Basse stated. “The only one that is bucking that trend is going to be the beef side of the plate where the cattle market is going to see the higher price with record highs and a better opportunity for those farmers going forward.”

Rising Interest Rates

Turning towards their lender for a conversation on interest rates has some producers pausing to make the leap of faith by tackling big investments. Basse, however, reminded the PDPW audience that 7% interest rates are here to stay, but this rate is relatively low compared to history. This is felt beyond U.S. soil, as high-interest rates have followed suit all around the world.

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