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September 26, 2019

Dairy Prices Should Average $1 Higher Next Year

 |  By: Jim Dickrell

Dairy prices will likely average a $1/cwt higher—or more—next year, believe University of Wisconsin dairy economists Bob Cropp and Mark Stephenson. Both are much more optimistic than current future market levels, which have Class III prices tanking to $16 at the start of the year and not recovering back to $17 until next August.

“We will not have a one-month burst to $19 milk [this fall] and then have a collapse. There is no event that would make that happen,” says Stephens.

Cropp says prices could dip to the mid-$17s in the first quarter, but he sees them rebounding to $18 fairly quickly and staying there for the rest of the year.

Milk prices that are a dollar higher will be an attractive incentive to expand milk production next year as producers try to rebuild their balance sheets. But that production growth will likely be limited due to continued farm exits, lower farm equity to finance expansion, fewer replacements available and poor forage quality to sustain more milk per cow, says Cropp.

World prices are soft, they acknowledge, but world milk production growth is also limited. Both factors bode well for U.S. dairy exports. While there is concern over a recession in the United States, both feel that that is at least a year off if it occurs at all.

For more on the Cropp-Stephenson dairy price outlook, click here.

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