Bleak Outlook for 2018 Milk Prices
Bob Cropp and Mark Stephenson had little good news to report this week in their monthly analysis of milk prices following the release of the November milk production report.
Cropp and Stephenson are both dairy economists with the University of Wisconsin and follow markets closely. Milk prices in 2018 won’t improve any time soon; Class III prices might only average $15.20 in 2018, says Cropp. That’s a full dollar less than this year.
The toughest challenges will come in the next few months, with Class III prices struggling to remain in the $14 range. January through March, Class III futures are all currently trading below $14, and don’t rise above $15 until July.
The economists are a little more hopeful prices will improve in the latter half of the year. They expect milk production to slow because of the low prices, some farms to exit altogether and consumption to remain strong. If production slows by spring and stocks of dairy commodities are drawn down, prices could recover somewhat. “We could see $16 Class III prices by the second half,” says Cropp.
But farmers will have to survive the first half of the year first. The low profitability levels of both 2016 and 2017 have eroded many farms’ working capital and liquidity, says Stephenson. “That will be reflected in lending by the time you get into planting, and could affect operating loans,” he says.
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