In his speech at INTL FCStone’s 11th Annual Dairy Outlook Conference on June 18, vice president of FSCStone’s food division Robert Chesler focused his dairy outlook on milk (CME:DFM14), suggesting there’s been a “global trend of more milk” in the dairy market over the last year.
Writing in Futures, Thomas Dixon reports that Chesler pointed out that almost all of the major milk-producing countries are up in production and price. Moving forward, he discussed what factors could impact whether the market sees a massive correction or sustained growth.
El Niño, which could be especially strong this year, remains the major potential destabilizer of the market globally, Chesler said.
New Zealand’s production will depend largely on El Niño’s effect, as will production in the U.S., particularly in California. Chesler said the current drought in California, however, is overblown — they’re still making a lot of milk.
“Stop listening to (talk about the drought in California),” Chesler said. “The drought is a problem … but the problem from a milk perspective rolls into next year. The hay that needed to get water for cutting this year got water. They’re going to feed that first cut to their cows, but it’s the subsequent cuttings of hay that are going to hamper quality — they’ll have to go to dry cuts.” If El Niño brings rain to the West, California will be very bullish, he said.
Another major factor that could impact market volatility and price is the EU’s abolition of its milk quota in April 2015.
Read more of Dixon’s report and Chesler’s perspective on China by logging on to: www.futuresmag.com/2014/06/19/dairy-outlook-depends-largely-on-el-nio.