Volatility road sign.
June 22, 2020

Can These Dairy Markets Hold?

 |  By: Jim Dickrell

May’s milk production report, with milk output down 1 percent, cow numbers declining and milk per cow also off have fueled the recent skyrocketing of dairy futures markets.

The question is: Can these markets hold? University of Wisconsin dairy economists Bob Cropp and Mark Stephenson, in their monthly dairy outlook podcast, are both hopeful and wary.

“We could see these prices holding pretty good,” says Cropp. “The big question: Will farmers continue to hold production down. If we can keep milk production down, yes, we could see prices [through the end of the year] that the futures markets are seeing (above $16/cwt Class III.)”

But Cropp is also wary of what could happen with the coronavirus pandemic through the rest of the year. It creates so much uncertainty, he says, that he is not forecasting prices any higher than what the futures markets are seeing.

Stephenson agrees. “Farmers are starting to react to these higher milk prices, at least in the West,” he says. “We’re seeing some values for springers that we haven’t seen in years.

“That tells us these guys want to make milk. That’s going to kill the golden goose,” he says.

Both economists are urging dairy farmers to closely watch markets, know their cost of production and their financial situation. Whether to lock prices in should depend on each farm’s financial situation and their tolerance for risk, they say.

The one thing they are urging farmers to do is to sign up for the Dairy Margin Coverage (DMC) program this fall if they do not have coverage. The DMC program will provide affordable coverage for all farms for the first 5 million pounds of their production history. Sign-up for the 2021 program runs from October 12 through December 11.

You can listen to the entire 14-minute Cropp/Stephenson podcast here.

 

 

https://dairymarkets.org/PubPod/Podcast/Outlook/