Second Part of March 2017 is full of turbulent events, to name just two of them: US Feds just raised interest rates by 0.25% and UK is expected to trigger Article 50. How will US dairy markets react? Picking Alpha has asked a leading USA dairy broker Brian Rice, the founder and Co-Owner of Rice Dairy LLC, in Chicago, IL, to comment on the events.
Q.: Theresa May has said she intends to trigger Article 50 process by the end of March 2017. How would triggering or not Article 50 affect US dairy market overall?
B.R.: Triggering Article 50 could potentially continue to devalue both the British Pound & the Euro which would in turn strengthen the US dollar. The UK dairy industry specifically will hope to retain tariff-free trade with other EU countries, a luxury it currently takes advantage of. Other topics like producer support have yet to be determined, but one cannot imagine that the government (UK or EU) will turn away from dairy farmers at this uncertain time.
Q.: How does stronger dollar influence US dairy export and what are your expectations for the rest of March?
B.R.: A stronger dollar has an immediate impact on dairy exports and a great example of that has been in play the past two years. Before the rally in the dollar, US dairy exports counted for over 14.5% of total production for years 2013-14. Since then, with the dollar increasing in value, that figure has dipped below 14%. When it comes to Non-fat Dry Milk, the most exportable product in the dairy complex, the dollar plays a heavy hand. Especially when you consider the competition – the European Union and New Zealand – a move higher for the dollar index spells a competitive disadvantage for the US.
Q.: US Feds just raised the interest rate by .25%, will it change and how current trends in the US Dairy Market?
B.R.: Any changes in current trends would be longer term. One could suggest that expansions on the producer end of the supply chain have a chance to slow down if lenders increase rates. Also, if there is a negative affect on the overall US economy (which does not seem to be the case initially), that could eventually not bode well for dairy demand.
Brian Rice is the founder and Co-Owner of Rice Dairy LLC, a dairy brokerage firm in Chicago, IL. Rice Dairy LLC is now the leading brokerage firm in the dairy industry, offering consulting and brokerage services along with information products and educational resources. Rice is also the CEO of Vault Technologies, a dairy software start-up and the director of Rice Dairy International Ltd. He sits on the Board of Directors of the International Dairy Foods Association (IDFA) and is a member of the American Dairy Products Institute’s (ADPI) price and policy task force.