BOISE — The lifting of European Union milk quotas last April has resulted in rivers of milk flooding the global market and is a major reason for depressed milk prices, two ag economists told Idaho producers last week.
But the low prices won’t last forever and the dairy industry will have a lot of good opportunities in the future, dairy economist Marin Bozic told United Dairymen of Idaho members.
As the global population increases and incomes in developing nations rise, “there will be more people that can afford to buy dairy products,” he said. “There will be huge opportunities for us.”
Bozic, associated director of the Midwest Dairy Foods Research Center and a University of Minnesota dairy economist, said volatility in the dairy industry can benefit low-cost producers.
“There is a massive opportunity for low-cost producers around the world, Idaho among them,” he said. “There will be increased demand for dairy foods not just for next year but for decades to come.”
He said dairy producers have to be willing to re-invent themselves quickly to take advantage of opportunities as they arise.
“You have to be able to pivot and pivot radically,” he said. “You have to look for new business models, new partnerships, new supply chain models, etc., that allow you to maintain your competitive edge.”
Bozic said “rivers of milk are coming out of Germany” and other European Union nations since the EU lifted milk production quotas and several EU nations comparable in milk production terms to the leading U.S. states are growing at double digits.
“Really what’s driving the milk situation in the world right now is the removal of quotas in the EU,” he said.
In a separate presentation to Food Producers of Idaho members, Doug Robison, Northwest Farm Credit Service’s vice president of agriculture for Western Idaho, said that situation has been exacerbated by Russian’s ban on dairy products from EU nations.
“All the export volume out of the EU had to find a new ... place in the world market,” he said. “It’s a major issue on the supply side ... and something that’s certainly affecting Idaho dairymen.”
Bozic said the current milk price slump may last longer than previous slumps but “I think in the end markets will come around and we will see higher milk prices by the first quarter of 2017.”
Nampa dairyman Mike Siegersma said Bozic’s presentation “was pretty much, hang in there, watch your costs and wait for it to rise. He said the long-term looks good; we’re in the right industry. But short-term, we have this (challenge) to work through.”
Gooding producer Steve Ballard said he agreed with Bozic that the current dairy slump won’t be a repeat of 2009, when Idaho dairymen lost an estimated $690 million in equity.
“In 2009, the feed situation was crazy,” he said. “Right now feed is not that bad. I don’t think another 2009 is in the cards.”