The Dairy Disconnect

California is the top dairy-producing state in the country, producing about one-fifth of the nation's milk. With stats like that, you can bet we’re going to be keeping a keen eye on dairy trends where we are seeing mixed signals.

Shawn Hackett of Hackett Financial Advisors…

“There's two factors going on. We have this wide-spreading avian flu. It's now expanded into California, and we've had buyers get very fearful about future production and have been front-end loaning their purchases well into the future because they're concerned about the future supply. However, the USDA, as of the last production report, said that production grew slightly. So, there's a disconnect between the fear in the market from avian flu and what the USDA was reporting.”

That’s milk supply. Now let’s talk herd expansion…

“Right now, what I see is probably one of the tightest, greatest shortages of dairy heifers we've ever seen, meaning that even if the dairyman decides he wants to go out and expand – it doesn't mean he can't - but I don't think we can turn this faucet on as quickly as we've done before. And if China's money-printing bazooka gun comes to fruition and they start buying milk powder again, which they have for a while, we could have a situation where there's way too much demand and an inability for the U.S. to supply that.

For more information on what’s ahead in the dairy market, go to Hackettadvisors.com.