Covington more optimistic for dairy in 2019
By Sherry Bunting, from Farmshine, February 1, 2019
EAST EARL, Pa. — Bringing a bit of good news, along with good understanding, of dairy markets, Calvin Covington kicked off R&J Dairy Consulting’s winter dairy seminar Tuesday (Jan. 29) talking about what needs to happen for milk prices to improve.
He had the full attention of the 300 dairy producers who gathered at Shady Maple Smorgasbord in East Earl for the meeting, where they learned that Covington anticipates 2019 Federal Order blend prices in the Northeast to improve by $1.00 to $1.50 in 2019 compared with 2018.
“But it’s going to be a walk, not a run. they will move up gradually,” he said. “Last year, I was pessimistic. This year, I am a lot more optimistic.”
Covington also talked about the “4 C’s” that need tochange as the major factors to improve farm level milk prices: Consumption, Cow numbers, Components and Cooperation.
“The most important is consumption,” said Covington. “What is the consumer telling us?”
He showed a graph of how overall dairy consumption has steadily increased on a solids basis from 2000 though 2018, and he displayed a chart (above) showing that the consumer is telling us they want the milkfat — that it’s the solids in the milk — the bufferfat and protein — that give milk value.
“Exports are growing. That’s where most of our growth in demand has been coming from… but we export commodities — milk powder, whey, lactose,” he said. “We export very little butter and cheese.”
While he said exports are of course important to the milk check, he emphasized the need to focus on domestic demand, which has been overlooked and “presents real opportunity. What can we do to lift domestic demand and make that happen?”
In a word, said Covington: “Milkfat. That’s number one. We in the dairy industry need to talk about milkfat and not hide behind it not wanting things to change. Consumers are a whole lot smarter than we are. They are figuring it out. They are buying more fat… and we need to sell thatt.”
He said that the average fat content of all types of fluid milk sales from fat-free to whole milk — nationwide — is 2%.
“If that moved up by just 1/4 to 1/2 of 1 percent, the difference in farmer milk checks would be substantial. Fluid milk sales have been declining (in total), but whole milk sales are up three years in a row,” Covington explained.
“Consumers want that taste, and we’re not talking about it.”
He also pointed out how per capita butter consumption is at its highest point in over 10 years.
“That’s big, and that’s why the butterfat price in your milk check is double the protein price,” said Covington, explaining that in addition to butter, natural cheeses are one-third fat, that we forget about.
“Natural cheese consumption is higher, but it’s the processed cheeses, that contain less fat, that are moving lower,” he said.
He noted that for many years, the research said fat is bad for us.
“Now smart people are showing this to be false and we have books and articles about how butter, cheese and whole milk are good for us.”
Covington noted that what the industry needs to focus on is giving consumers more of what they want and not being afraid to “sell more fat. That will up your milk price,” he pointed out, encouraging producers to focus on pounds of components because this is the majority of how their milk price is determined.
He shared a story about meeting Queen Elizabeth in England with one of the oldest Jersey herds in the world. Those cows produce more than 6% fat, and that’s what she drinks and she’s 92 years old.
He also observed that the Queen knows as much about cows and agriculture as about anyone he’s met.
Look for more highlights and details from Covington’s fascinating discussions and his 2019 market outlook for the Northeast and the Southeast in a future Farmshine.