$18 Milk In 2017?
In their most recent podcast, University of Wisconsin Madison economists Bob Cropp and Mark Stephenson discuss what farmers can expect for milk prices the remainder of the year. Their prediction? Milk prices will “definitely” be higher than a year ago average and $18 milk is not out of the question. The strength of a price rally will rely on exports and domestic demand to overcome large increases in milk production.
The most recent milk production report showed production up overall. Declines were seen in the west including California and New Mexico. Cropp credits the declines in New Mexico to winter storm Goliath which killed thousands of cows in the area last winter. As far as California goes, he doesn’t expect to see cow numbers improve there anytime soon.
“California folks can’t seem to catch a break,” Stephensen said. “For four years we’re talking about drought and now cows are just about drowning out there. I wouldn’t be surprised to see cow numbers down next month.”
Production in Idaho and Texas both increased. In Texas the story is booming demand Cropp says. “Texas is milking 39,000 cows more than a year ago,” he says. There’s a new plant in Texas and Stephensen thinks farmers are trying to fill it.
Cropp was encouraged by the uptick in exports at the end of 2016 and hopes 2017 will remain just as strong.
“We’re betting on stronger exports and good domestic butter and cheese sales for better milk prices,” he says. “It’s gonna take that with the increase in production.”
While Cropp is worried about cheese prices, he’s not overly concerned as futures markets seem to be remaining relatively strong in a time the market expects softness. “After the holiday season and the super bowl is over, we expect a little softness,” he says. While some analysts are predicting $18 milk for 2017, he’s not ruling that out, but his projections are more conservative, averaging $17.15 over the year versus $14.78 for 2016.
Stephensen is quick to add the market outlook could change quickly.
“There are going to be two times when we’ve got recovering markets when you will see things move,” he explains. “The bottom [which he says was in in May] and when they think we are getting tight on supplies and stocks.”
Watch the full podcast here.