Monday, April 20, 2009

Long Term Trends

The long term trends for Class III butterfat and protein prices indicate an upward trend for protein and a steady level for butterfat. There is good reason for these trends and good reasons for the short term drops.

Lets examine the long term consumption trends for fluid milk, butter and cheese in the U.S. over the last century - yes 100 years of data.

Fluid milk has had a very long term downward trend in consumption. We can be critical of the trend, we can rationalize the trend, but it is real and there is a very high probability that it will continue.

Butter consumption dropped by 75% until the mid 70's. Since then it has been steady. So has the price of butterfat.

Cheese consumption is steadily going the other way.

Cheese consumption has been increasing for years and there is no reason to think it won't continue (April 9 blog post). Cheese cannot be made without protein. Does it bear a resemblance to the chart above on protein price? It should and it does.

These trends significantly impact the dairy industry. When fluid milk was "King", our dairy industry econimics were dominated by domestic economic factors. Fluid milk has a limited shelf life and was expensive to transport due to the high volume of water.

Now that cheese is becoming "King", the dairy financial picture shifts drastically. Because cheese has a much longer shelf life and has up to 10 times the value of milk on a per lb. basis, the global dairy economy comes into play. Dairy economics are now impacted by global supply and demand and fluctuations in currency rates.

Poultry, beef, soybeans and many other food and agricultural markets have had to live with the influence of global supply and demand changes and currency fluctuations for years. Now dairy can join the list of industries subject to the ups and downs of global influences.

How will the dairy industry cope? Will the industry have to emphasize the use of tools like future markets and exchange rate hedging? More to come on this in future posts.

1 comment:

  1. Do you think that to dramatically improve your success rate you have to read tons of thick books, buy expensive software and spend countless hours of learning more about Forex?

    What I'm going to share with you is something very EASY to use and very POWERFUL at the same time.

    Let me give you an EXAMPLE:

    Imagine you trade a system that makes 50% winning trades, but another 50% are losing trades. If you increase your odds of winning by only 20%, that would make 70% winning trades and 30% losing trades.

    Well, HOW TO accomplish that?

    Just pick the best trending pair at the current time and simply follow the trend! I have found ONE INCREDIBLE TOOL that continuously scans the Forex market and picks the most reliable trending pairs for you.

    By taking signals in the direction of a strong trend you would REDUCE UNNECESSARY LOSSES and increase the odds of winning. You need to know "how well" the market is trending to avoid very short-term trends.

    STOP hunting the market for every potential trade. Pick only the best trending pairs and time frames and DO NOT take any trading signals in the choppy market (unless you know exactly what you are doing).

    Successful traders keep it simple and this is the way how the pros made fortunes in the markets - by trading less and making more.

    To increase the profitability of any system or robot you are currently using, check out this easy and powerful ultimate solution: