ROLAND SOSSNA, Editor International Dairy Magazine: 2017 starts with uncertainty

roland_sossna_180px-brightWhat’s in store for 2017, price-wise? If I knew, I’d become a rich man soon. But one thing is certain: looking at prices, margins and profit, 2017 can only get better for most of the dairy companies and dairy farmers. With the exception of the private and multinational milk processors for whom the past two years were not all that bad as they were able to profit from low milk prices.

Again, it was not policy, it was the market that made milk producers reduce their output almost all over the globe. Meanwhile, raw milk pools are much smaller than they used to be a couple of months ago. And that curbs the price development. Another important driver is oil price. As it seems, OPEC is set to enforce higher crude oil prices and although this might stimulate inflation in Western countries, it will also bring spending power to oil exporting countries. One can bet that dairy imports will increase in these regions. But all will depend on how high prices climb and how exchange rates will develop against the US dollar. The Trump effect is still to come, if such a thing is really to be expected.

2017 will be marked by a degree of uncertainty. There are high stocks of SMP in EU stores and this stuff will sooner or later re-enter the market. One may only hope that the EU Commission will act smart enough not to disturb the ongoing recovery of prices. It stands to reason that the current asymmetry of protein and fat prices will stay for another couple of months.

The most important factor is, however, the reaction of dairy farmers to rising prices. Will they again start to milk as much as possible or will they be more cautious? All in all, 2017 promises to become a good milk year but there is a number of uncertainties.

 

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