Bob Cropp and Mark Stephenson, University of Wisconsin dairy economist.
August 23, 2018

Glimmers of Hope from July Dairy Reports

 |  By: Jim Dickrell

A slump in cows numbers and just a 0.4% gain in milk production in July offers a glimmer of hope that milk prices could rebound this fall.

 

“Things are looking a little better but not great,” says University of Wisconsin dairy economist Bob Cropp.

 

“We’ll take it,” concurs fellow economist Mark Stephenson, also with the University of Wisconsin. “$16 [Class III prices] look better than $14.”

 

The big news is that national cow numbers dipped 8,000 head versus a year ago and versus June numbers. California took the biggest dip, losing 12,000 head from a year ago. Minnesota was down 6,000 cows, and Michigan and Wisconsin were down 4,000 cows each. New York was down 2,000. All of these states are major cheese producers, says Cropp.

 

Butter inventories are also starting to tighten and use should increase as we progress further into the year and seasonal holiday sales pick up. “That’s mildly bullish,” says Cropp. Cheese stocks are up 5.7% overall, however.

 

Export sales in the second half of the year are the biggest question. Sales through June were strong, but some of the June sales might have been in anticipation of retaliatory tariffs imposed by Mexico and China staring in July.

 

Stephenson notes that even with the tariffs, exports won’t go to zero to Mexico and China. Their demand for dairy is just too great and the world can’t supply them without U.S. sales, he says. The drought in Europe also will curtail production there, perhaps opening up room for U.S. sales to some of their traditional customers.

 

Prices this fall and winter will ultimately depend on how markets clear, says Stephenson. “We have a lot of product in inventory, we’re making a lot of product, selling a lot of product. If our production stays modest, we could see some recovery through this,” he says.

 

For the full 13-minute podcast of Cropp/Stephenson market analysis, click here.

 

 

 

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