Bob Cropp and Mark Stephenson.
January 25, 2017

Economists Still Bullish Despite Bearish Dairy Reports

 |  By: Jim Dickrell

University of Wisconsin dairy economists Bob Cropp and Mark Stephenson are still optimistic that 2017 Class III prices will average north of $17, despite two somewhat bearish USDA reports released this week.

Both the December milk production and Cold Storage  reports were released Tuesday, with milk production up 2.2%, butter stocks up 10% and cheese stocks up about 5%.

For the year, milk production climbed to 212.5 billion lb, up 1.9% from 2015. Cow numbers averaged 9.333 million head, 16,000 more than in 2015.

“This was a strong year for milk production,” says Stephenson. “In the north, most states (Montana being the lone exception) were up.”

In the South, only Arizona, Texas and Georgia reported higher milk production in 2016. California production, although up the last three months of the year, was down 1% on an annual basis.

The strong Cold Storage and inventory numbers reported in the Cold Storage report are a bit of a surprise to Cropp and Stephenson. But they’re also not a total shock because this is generally what happens after retailers stock up for their holiday sales in November and December. What needed to happen is the Green Bay Packers making it to the Super Bowl, says Cropp. “If the Packers had won [in Atlanta], that could have added 10¢ to cheese prices,” he quips.

Still, both economists are optimistic. Class III prices might dip this spring as consumers eat their way through cheese and butter stocks. But both Cropp and Stephenson expect Class III milk prices to rebound in the summer, and average above $17 for the year.

You can view their analysis here.