One of the nation's leading farm economists thinks that the agricultural landscape in America today feels a lot like the roaring 20s of one hundred years ago. Dan Basse of AgResources Company in Chicago presented his analysis of the industry during the Professional Dairy Producers of Wisconsin annual business conference in Wisconsin Dells on Thursday. Despite the year-long pandemic, he believes 2021 will be a banner year for most producers--mainly because the demand for food products from Chinese buyers is escalating as the average household income in that country continues to rise.
"I see a lot of sectors doing well in the year ahead, but especially those who grow grains, such as corn, soybeans, wheat and barley," Basse predicted. "The market should be very strong for these commodities in the next two- to three-years as China is expected to purchase $43 billion in goods this year alone."
As a result, higher feed prices will eventually impact the dairy industry in a positive manner. He explained that when the price of corn goes up, it typically forces dairy producers to cull lower producing cows to save money on feed costs.
"Less cows in the herd means lower milk production overall, which then drives up the price of milk," he said.
He foresees milk prices peaking during the third and fourth quarters of the year at around $19.50 per hundredweight, and going even higher in 2022.
"I am confident that milk prices won't be as volatile as they were in 2020 during the pandemic. The extreme swings of the past year made it difficult to practice any type of risk management. As usual, I expect a spring flush in the months ahead, followed by a leveling off of production. Of course, the weather will also have an impact on the markets depending how the spring planting season goes."
In addition to China's larger appetite for more and better food, Basse says the continuous outbreak of African Swine Fever in that country is another factor impacting the worldwide markets. He explained that ASF restrictions are forcing domestic hog producers in China to feed more corn in lieu of food waste from restaurants, which would theoretically drive up export demands from the United States and many other top corn growing nations.
Categories: Wisconsin, Business, Livestock, Dairy Cattle