Strategic Dairy Sourcing https://www.optimallysourcing.com Optimally Thu, 11 Apr 2019 22:01:15 +0000 en-US hourly 1 https://wordpress.org/?v=5.1.1 https://www.optimallysourcing.com/wp-content/uploads/2018/10/favicon-1.png Strategic Dairy Sourcing https://www.optimallysourcing.com 32 32 As a Trade Deal Nears With China, Another Looms With Europe https://www.optimallysourcing.com/as-a-trade-deal-nears-with-china-another-looms-with-europe/ Thu, 11 Apr 2019 22:01:15 +0000 https://www.optimallysourcing.com/?p=1447 With news of a deal between the US and China nearing, it seems as though the Dairy farmers and producers will be getting the demand support that they have sought in the recent months. Nothing has been announced, but the general optimism with those familiar with the matter seems to signal that an end is […]

The post As a Trade Deal Nears With China, Another Looms With Europe appeared first on Strategic Dairy Sourcing.

]]>
With news of a deal between the US and China nearing, it seems as though the Dairy farmers and producers will be getting the demand support that they have sought in the recent months. Nothing has been announced, but the general optimism with those familiar with the matter seems to signal that an end is near. This can only show positive signs for a surging dairy complex that, until very recently, was seeing seasonally low prices and bearish signals. Additionally, recent souring sentiment from the White House regarding trade policy with the EU looms in the background. A trade dispute with the EU may be far more damaging to the dairy complex than what has happened with China as the US relies heavily on European dairy imports. With cheese markets finally normalizing in the $1.60’s, what would be in store for the industry with this increase in volatility?

US exports of dairy products are still strong by most measures: the net trade gap closed the year 8.5% higher vs year prior (see our monthly market report for more detail). But the last few months have shown a turning of the tides, with exports down in total and especially with some of its largest dairy trading partners (including double digit decreases in Mexico over the last couple of months, the largest US dairy trading partner). While dairy is one of the smaller trade items with China, the US still saw roughly 166,000 Metric Tons of dairy products (365 Million Lbs) leaving for China in 2018, according to the US Dairy Export Council (USDEC), it doesn’t mean that US farmers and producers are okay. We saw the government announce protection for those farmers due to low farm gate prices received as a result of retaliatory tariffs and now, as more tariffs loom with our European trading partners, a new round of support has been announced. The general sense around our circle is that farmers would rather have the income from a stronger market than be receiving government subsidies for a lack of one.

Chinese dairy imports from the US are down in the beginning of 2019, while Chinese demand for dairy products remains strong. This is reasonable, considering China is still consuming product and the tariffs have likely priced the US out of certain markets. Chinese consumers still need to get their products from somewhere. But what we think has surprised people is the strength of this demand. The most recent Global Dairy Trade Auction saw prices rise due to strong demand for the ninth auction in a row, going back into 2018. Driving most of this growth is North Asia, dominated by China, which ate up 50% of the product offered in the most recent auction. Could this be the new norm? Do we expect China to grow its dairy demand going out into the future? Well, yes and no. Our long-run forecasts have Chinese demand growing in perpetuity, so long as overall economic growth meets certain thresholds, but we also believe that this most recent bout of demand seems to be a pattern of bulking up or pre-purchasing product for future demand.

As for Europe, of which 76% of all US cheese imports come from, the image is far less clear. We don’t know what these tariffs will look like, or if they will even happen. But we are preparing for the worst and maybe we will be pleasantly surprised. The proposed Tariffs would only fall on about 72% of cheeses imported from Europe, so the net effect will be on 55% of US total imports. Since much of the cheese produced in Europe falls into the “specialty” category, we don’t see easy replacements with domestic product. This means that Tariff will most likely fall on the consumer.

All else being equal, both of these events happening at the same time could skyrocket milk prices, albeit in different ways. returning demand from China will drive powder prices higher in a frenzy to meet this demand. While a supply shock from an imposed tariff on Europe would require more affordable domestic cheeses to fill in gaps. Both of these happening at the same time would put dairy products in short supply. The hardest effects of these outcomes would fall on the purchasers, not producers of dairy products as they would be stuck paying for government imposed tariffs on products that aren’t readily substitutable. All of this is to say: don’t be surprised when we see $1.80’s cheese markets in the near future.

The post As a Trade Deal Nears With China, Another Looms With Europe appeared first on Strategic Dairy Sourcing.

]]>
March 2019 Dairy Market Outlook https://www.optimallysourcing.com/march-2019-dairy-market-outlook/ Mon, 01 Apr 2019 21:53:29 +0000 https://www.optimallysourcing.com/?p=1436 The post March 2019 Dairy Market Outlook appeared first on Strategic Dairy Sourcing.

]]>
As we continue to monitor dairy market trends, we would like to share our research and opinions with you, our loyal customer. Click the link below to download the most recent report.

The post March 2019 Dairy Market Outlook appeared first on Strategic Dairy Sourcing.

]]>
February 2019 Dairy Market Outlook https://www.optimallysourcing.com/february-2019-dairy-market-outlook/ Tue, 05 Mar 2019 17:26:15 +0000 http://www.optimallysourcing.com/?p=1293 The post February 2019 Dairy Market Outlook appeared first on Strategic Dairy Sourcing.

]]>
As we continue to monitor dairy market trends, we would like to share our research and opinions with you, our loyal customer. Click the link below to download the most recent report.

The post February 2019 Dairy Market Outlook appeared first on Strategic Dairy Sourcing.

]]>
January 2019 Dairy Market Outlook https://www.optimallysourcing.com/january-2019-dairy-market-outlook/ Tue, 05 Mar 2019 17:10:24 +0000 http://www.optimallysourcing.com/?p=1282 The post January 2019 Dairy Market Outlook appeared first on Strategic Dairy Sourcing.

]]>
As we continue to monitor dairy market trends, we would like to share our research and opinions with you, our loyal customer. Click the link below to download the most recent report.

The post January 2019 Dairy Market Outlook appeared first on Strategic Dairy Sourcing.

]]>
McKinsey & Company Whitepaper Sheds Light on Dairy Market Worries https://www.optimallysourcing.com/mckinsey-company-whitepaper-sheds-light-on-dairy-market-worries/ Thu, 28 Feb 2019 21:09:12 +0000 http://www.optimallysourcing.com/?p=1263 The post McKinsey & Company Whitepaper Sheds Light on Dairy Market Worries appeared first on Strategic Dairy Sourcing.

]]>
Recent trends in the retail dairy market have thrown the industry into a frenzy, with worry about the future of dairy at an all time high. The short story, the industry faces waning demand for traditional milk products due to shifting eating and purchasing habits, entrants of dairy alternatives claiming additional health benefits, and increasing dietary restrictions in certain demographic groups. A recent white paper by McKinsey and Company, in collaboration with the International Dairy Foods Association (IDFA), highlights these headwinds, but offers up some solutions and paths towards growth and profitability for dairy operators. While the white paper paints a bleak picture for the industry, it does still see upside if manufacturers are willing to search for it.

Most dairy industry professionals are aware of the ever growing changes in the dairy marketplace of recent years. “A look at the US Market tells a cautionary tale; from 2015 to 2019, top dairy products experienced sales declines, including cheese (-1.4 percent), milk (-4.9 percent), and yogurt (-2.3 percent),” write the authors of the paper. This decrease in demand has led to operators being forced to innovate and sustain growth in different ways. Top Dairy CEO’s have dumped capital and resources into gaining competitive advantage through manufacturing efficiencies and product innovation, but rarely do companies site consumer insight capabilities as a competitive advantage. This, as McKinsey argues, is the key to domestic growth. The large-scale data that is available to the industry, paired with advanced data analytics techniques, can allow dairy manufacturers, and the food service industry as a whole, the ability to segment and target customers on a whole new level. Being able to understand these target consumers and create products to match their desires is critical in the growth of the industry. McKinsey also  suggests more tailored and numble supply chains to help serve this new demand. These techniques are applicable to the Food industry as a whole. As consumers start to leverage more technology, operators have the ability to do so as well and can now reach the consumer in a larger variety of ways. To not take advantage of this ability is falling behind on your competitors and leaving your target consumer unsatisfied with their experience.

Click below to read the full white paper!

The post McKinsey & Company Whitepaper Sheds Light on Dairy Market Worries appeared first on Strategic Dairy Sourcing.

]]>
Optimally President, Ralph Hoffman, Featured in Cheese Market News https://www.optimallysourcing.com/optimally-president-ralph-hoffman-featured-in-cheese-market-news/ Mon, 07 Jan 2019 21:02:13 +0000 http://optimally.mm.dotcomweavers.net/?p=1122 The post Optimally President, Ralph Hoffman, Featured in Cheese Market News appeared first on Strategic Dairy Sourcing.

]]>

As the end of 2019 kicks into full gear, we look toward the future to see which of the most salient trends in the dairy industry will have lasting effects. While Dairy demand remains strong heading into the new year, the industry faces threats from looming trade issues, changing preferences to snacking/convenience and dairy substitutes. Recently, Optimally president, Ralph Hoffman, sat on a panel discussing these trends and what they mean for the future of the dairy complex. You can see the correspondence in the most recent issue of Cheese Market News.

The post Optimally President, Ralph Hoffman, Featured in Cheese Market News appeared first on Strategic Dairy Sourcing.

]]>
Despite Strong Employment Numbers, Restaurant Staffing Continues to Be an Issue https://www.optimallysourcing.com/despite-strong-employment-numbers-restaurant-staffing-continues-to-be-an-issue/ Thu, 15 Nov 2018 21:24:37 +0000 http://optimally.mm.dotcomweavers.net/?p=1090 A recent report by TDn2K, a research organization that specializes in human resources, states that food service operators are having more trouble than ever with both management and part time employment retention. While restaurant sales have accelerated YoY and employment has grown to match, restaurant turnover still seams to be a pain point. Pushing this […]

The post Despite Strong Employment Numbers, Restaurant Staffing Continues to Be an Issue appeared first on Strategic Dairy Sourcing.

]]>
A recent report by TDn2K, a research organization that specializes in human resources, states that food service operators are having more trouble than ever with both management and part time employment retention. While restaurant sales have accelerated YoY and employment has grown to match, restaurant turnover still seams to be a pain point. Pushing this turnover trend is oversupply of jobs: In October 2018 Unemployment was at a 49-year-low of 3.7%, what most economists agree is nearing full employment. While high employment means a stronger economy, the chief driver strong restaurant sales, the oversupply in the labor market increases mobility of jobs for workers in search of higher wages.

US Unemployment Rate

source: tradingeconomics.com

There are a couple ways to interpret this news: stronger sales are positive for the industry, but are coupled with lower restaurant traffic. The staffing issues that the industry faces fall to the back burner as long as sales continue to grow. However, the combination of these two factors create a highly economy dependent cocktail. Consumers are visiting restaurants less but spending more because they have more free income to spend. However, as soon as the economic outlook shifts, consumers will be visiting stores less and spending less. When coupled with employee retention issues, we expect to see some turmoil from the industry in this case. We believe that as long as the economy chugs along at it’s current rate, we will see food operators enjoy healthy employment and prosperity, but as soon as the economy gets a sniff of bad news or downturn, we look for these macrotrends to take over.

Source: https://tdn2k.com/snapshot/2018-10/

The post Despite Strong Employment Numbers, Restaurant Staffing Continues to Be an Issue appeared first on Strategic Dairy Sourcing.

]]>
August 2018 Dairy Market Outlook https://www.optimallysourcing.com/august-2018-dairy-market-outlook/ Wed, 31 Oct 2018 19:44:39 +0000 http://optimally.mm.dotcomweavers.net/?p=1047 The post August 2018 Dairy Market Outlook appeared first on Strategic Dairy Sourcing.

]]>

As we continue to monitor dairy market trends, we would like to share our research and opinions with you.

Please click the link below to access the August 2018 Dairy Market Outlook

The post August 2018 Dairy Market Outlook appeared first on Strategic Dairy Sourcing.

]]>
October 2018 Dairy Market Outlook https://www.optimallysourcing.com/october-2018-dairy-market-outlook/ Wed, 31 Oct 2018 18:46:48 +0000 http://optimally.mm.dotcomweavers.net/?p=1034 The post October 2018 Dairy Market Outlook appeared first on Strategic Dairy Sourcing.

]]>

As we continue to monitor dairy market trends, we would like to share our research and opinions with you, our loyal customer. Click the link below to download the most recent report.

The post October 2018 Dairy Market Outlook appeared first on Strategic Dairy Sourcing.

]]>
September 2018 Dairy Market Outlook https://www.optimallysourcing.com/september-2018-dairy-market-outlook/ Tue, 30 Oct 2018 20:44:01 +0000 http://optimally.mm.dotcomweavers.net/?p=1020 The post September 2018 Dairy Market Outlook appeared first on Strategic Dairy Sourcing.

]]>

As we continue to monitor dairy market trends, we would like to share our research and opinions with you. Please click the link below to access the September 2018 Dairy Market Outlook

The post September 2018 Dairy Market Outlook appeared first on Strategic Dairy Sourcing.

]]>