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August 21, 2019

Bevy of Bad News Is Good News for Milk Prices

 |  By: Jim Dickrell

Milk production is down. Cow numbers are down. Heifers numbers are down. Exports are soft. Good quality hay is tight. Dairy farm exists continue.

This bombardment of bad news can mean only one thing: Good news for milk prices.

All of these challenges faced by the dairy industry mean the prospects for improved milk prices are very real, say Bob Cropp and Mark Stephenson, dairy economists with the University of Wisconsin.

Cropp ticks off the numbers:

• Milk production in the United States was flat in July, compared to a year ago, and down the previous two months.

• U.S. cow numbers in July are down 9,000 head from June, down 42,000 head from January, and 82,000 head from last July.

• Heifer numbers are at a ratio of 44.1 heifers per 100 adult cows, the lowest ratio since 2009.

• Dairy exists continue. Wisconsin, for example, lost 42 farms in July, and nearly 500 (491) since the beginning of the year.

• Dairy exports are running about 14% of milk production, down from 16% from last year.

• Feed quality is also questionable, dairy quality hay is tight, and feed prices are up.

As a consequence, both Cropp and Stephenson expect milk prices to increase this fall, perhaps even rising above $18 for Class III. And, they say, both the futures market and USDA are too pessimistic for next year as well. “Futures markets in the first half of 2020 are at $17 for Class III and below $17 for the second half. USDA has a Class III average of $16.65 next year, which is about 25₵ higher than this year,” says Cropp.

Both are likely to be too low, he and Stephenson say.

Exports are the wild card, but marketers are finding new homes for sales that have been lost to China due to the trade war and African Swine Fever effects on whey sales. And the major exporting countries such as New Zealand and in Europe are not growing.  

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