Monthly Archives: November 2011

Check the latest issue of Progressive Dairyman (Issue 16, 11/1/2011), page 96.

I am watching closely the Italian Government 10-yr bond yields, i.e. interest rates that Italians have to pay for their debt. That interest rate has been rising steadily since late August, and has an ominous figure of 6.66% today.
Link here: http://www.bloomberg.com/apps/quote?ticker=GBTPGR10:IND

Folks, this points to Euro facing very significant problems in the future, and possibly recession in Europe. What would be effects on US dairy prices?

‎1) Investors rush to buy U.S. dollar, making dollar more expensive, and consequently making our dairy exports more expensive.

2) Lower demand in Europe. That one has more than one effect – 2.1) Our exports to EU were only 100 mil in 2010 (compare to 3.1 billion total), so I am not much worried about that. 2.2) Recession in EU may mean lower dairy prices in EU, so less production increase –> good for us.
‎3) Global macroeconomic spillovers –> Europe sinking into another recession means US could be pulled in too, and that’s also not good for milk prices.

Interestingly enough, short term impact on milk prices may just as well be positive – prolonged expectations of coming crises (and this has been going on for some time) means higher uncertainty, which means less farms expansions with exports in mind, and less supply means higher prices, of course.