Cornell University’s Dr. Chris Wolf, the E. V. Baker Professor of Agricultural Economics and Director of Land Grant Affairs recently answered some questions for NEAFA regarding the Dairy Economic Outlook for 2022 from NEAFA Vice President Jenny Mills.
1. What is your outlook on dairy economics in 2022?
2022 looks to be a strong milk price year. The US and other major dairy exporting countries saw milk production declines in the second half of 2021 while demand was strong. Actual farm profitability likely depends heavily on feed and labor costs. If farms have plentiful feed, they should see an above average year.
2. What are two or three main drivers behind your outlook?
The main drivers are the pandemic, weather, and geopolitics. The pandemic is constricting labor markets and clogging supply chains as people are affected directly by illness and indirectly by issues such as childcare. Weather is always an issue. Oceania milk production has recently been affected by weather. Weather will also affect corn and soybeans in North and South America in the year to come. Finally, the situation in Ukraine and Taiwan have the potential to affect dairy markets depending on sanctions and other effects.
3. Inflation continues to be a main topic with markets. What is your outlook on impact of inflation to dairy economics?
Inflation impacts depend on the consumer and firm situation. If farms can stay out of the cash market, they may be able to handle inflation related to feed. Labor costs are difficult to handle in the short-run. Longer-term incentives are to invest in labor-saving technology.
At the consumer level, inflation will be regressive, affecting the lowest income segments.
4. What are two to three key themes with opportunities with the dairy markets? Are those global?
New habits may have been formed during pandemic in terms of at home consumption. Incentives remain needed to market high component milk as full fat dairy products have been a growth area for the market.
5. What impacts will supply chain restrictions have on the dairy market outlook?
Even with the port challenges in 2021, large amounts of dairy products were exported. As ports work through these issues, exports might even improve in 2022. Domestically, the dairy industry will continue to struggle with finding employees, particularly milk truck drivers. This might make for friction for farm milk prices, but dairy product demand is very strong.