Dairy Tariffs Bring More Market Uncertainty Then Ever
The imposition of tariffs on U.S. dairy products being exported to Mexico and China has created “more uncertainty than ever,” says University of Wisconsin dairy economist Bob Cropp.
Cropp and his colleague Mark Stephenson discussed current dairy market conditions in their monthly video chat posted here.
While it’s uncertain what the final impact will be on milk prices, he expects Class III and IV prices to average $1 less than what they would have been had the tariffs not been imposed. “I’m looking for $15 Class III prices by August, and into the high $15s by the end of the year,” he says.
The good news is that milk production is not growing rapidly, up only 1.2% in June. “That’s the kind of growth that we could easily consume domestically,” says Stephenson. But if exports fall, dairy products that would have been sent to foreign markets will have to be absorbed here as well.
The lower milk prices and hot, humid weather in some areas of the country suggest milk production is unlikely to be more than 1% in July, says Cropp. He thinks cow numbers could decline as well.
Cropp does expect some price recovery next year, but only in the $15 to $16 range. How well prices recover will largely depend on the impact of tariff on U.S. sales, whether U.S. exporters can find alternative markets and how long the trade war lasts.
View the entire video podcast here.