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June 29, 2016

Milk Market: Bearish Fundamentals Here To Stay

 |  By: Anna-Lisa Laca

The milk market hasn’t been all bad news lately. While May as a whole showed negative results, the rally taking place in late May and carrying into June was a breath of fresh air for dairy farmers in a market looking for good news Mike North told “AgDay TV” host Clinton Griffiths. Yet, as dairy farmers struggle to stay in business and rely on out producing low prices, bearish fundamentals grow stronger troubling the market.

“The challenge we have as an industry is that we didn’t crawl out from under bearish fundamentals,” North explained. “In fact we’ve perpetuated them.”

According to North, anybody that was considering culling some cows because of low prices is now saying “why would I do that when I just saw $5 come back to the market.”

Unfortunately, because of this mindset cows will stay and high volumes of production will remain, North said. Combine that with the decent feed prices we’re looking at into August and September, and it’s a recipe for an oversupply disaster.

“We’ve probably bought production through the rest of the year,” North said. “Which means more milk, more product and more inventory, and the reality of that is bad prices.”

Meanwhile on the global market place, the same thing is happening in Europe which will only be a greater challenge for demand.

“Bottom line we are looking at bigger production that will likely carry us through the summer,” North said. Without an increase in demand the market could see problems as the fall season arrives, he explained.

 “That’s not what we want to talk about,” he added, “but that’s our reality.”

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