A dairy market expert says there are warning signs in the market for 2021. Bryan Doherty of Total Farm Marketing says its production.
“If you really stop and look at production capability that our producers today have versus, even a decade ago or particular 20 or 30 years ago. It’s been a revolution. And so, when you get high prices you get some natural expansion, when you have good foodstuffs, and for the most part, we’ve had good crops, there’s feed availability. I think that’s our sort of our biggest wet rag is just dairy producers are just really good at what they do.”
Coming out of COVID, global demand could improve, by Doherty still cautions that production expansion could be a limiting factor.
“Don’t under estimate the demand markets worldwide, especially as we come out of COVID, but still it looks like the market has a couple of times now been way at the forefront of that and then we kind of get the rug pulled out from under us. And yet those rallies I think have kept the production cycle active and alive and the last several production reports have indicated that.”
Meanwhile, support from the Coronavirus Food Assistance Program and other government programs provide short-term support.
“There will be support, but we’ve got to recognize that when these things cycle back into the market, I think now twice the market has kind of got a taste of it and realized bears are ready to go when this comes in because they know this is short lived, whether it’s a two month window or six, it’s still has a short lived shelf life, and that would be sort of buzzword I’d use is shelf life of higher prices.”
And, on a related note, regarding R/WallStreetBets on Reddit, targeting stocks and then a commodity of silver, Doherty says don’t expect them to target farm commodities.
“When you look at some of these stocks that blew up, you have this mass media that can on their phone, get a zillion people with a few $1,000, so let’s say chase some stocks and kind of play the game, stick it to the hedge fund. When it comes to commodities, I don’t want to say Canada, I know everybody’s going to think well, what about the Hunt brothers, I mean yeah we saw that silver back 50-40 years ago, but the exchanges are different than the sense that they can raise the margin requirements and contracts daily if they want to, to slow down volatility in the marketplace to say look if you’re going to be into this market, you need to put up substantial money.”
He says doing so would need several big players with deep pockets to do the same in commodities.