Cropp and Stephenson: February Dairy Reports Don’t Provide Much Optimism
With milk production up 1.8% and cheese and butter inventories all climbing more than 2% in February, there isn’t yet a truck load of optimism for dairy markets in 2018.
That was the conclusion Bob Cropp and Mark Stephenson, dairy economists at the University of Wisconsin, reached today in their monthly podcast.
Nevertheless, dairy markets seem to be recovering, albeit slowly. Class III futures were up 90¢/cwt in March over February, and Class IV futures were up 40¢/cwt, thanks in part to better butter prices, says Cropp.
The U.S. needs to stay away from trade wars, says Stephenson. “If we have a little more marginal product when we’re trying to recover, that’s not a good thing,” he says.
Cropp notes that exports were up noticeably in January: Skim milk powder sales were up 3%, cheese sales were up 19% and dry whey sales were up 30%. “There is an opportunity to grow exports some, but it is going to be a competitive year,” he says. “We’re very competitive right now on dairy product prices, though that still doesn’t translate to good prices for farmers.”
Both economists are urging dairy farmers to consider enrolling or re-enrolling in the Dairy Margin Protection Program, once USDA announces sign-up after Congress made its changes last year. “I would suggest Tier I farmers (those producing less than 5 million pounds of milk per year) look at it,” says Stephenson. “You’re looking at a 30 to 40¢/cwt positive return over what you would have to spend to make coverage.”
In terms of milk prices, both economists are projecting $15 Class III prices by the end of the year. That could go slightly higher, depending on the cropping year and any summer heat stress.