Declining bar chart
April 24, 2020

Have Milk Prices Hit Bottom?

 |  By: Jim Dickrell

University of Wisconsin dairy economists Mark Stephenson and Bob Cropp, both speaking from and sheltering at home for their monthly market outlook podcast, say that if there is any good news in dairy markets it is that they’ve probably hit bottom.

“We are close to it, unless you think the cheese market can drop below $1/lb,” says Cropp. “That is possible, but hopefully we’re at the bottom.”

What happens next will depend on milk production moving forward, how quickly consumption in restaurants and food service rebounds, and on exports.

The good news is the rebound in Class III and IV prices as we move through the year. While prices are likely to hit their lowest point in May, Class III futures prices climb to $13 in July and reach 15 and above in the fourth quarter. Class IV prices are lower, but they too at least get above $13 by October.

Cropp notes the United States Department of Agriculture is projecting a Class III average of just $12.15 for the year. But current futures prices (above) would average out to more than that, says Cropp.

“We will get some strength in prices in the second half, but how much—I don’t know,” he says.

Of some concern was the March milk production report, with national milk output up 2.2% and cow numbers up 5,000 head over February (47,000 head over a year ago). The big gains in cow numbers over a year ago came in Texas, up 33,000; Idaho, up 29,000, and Colorado, up 11,000. California was down 3,000 head; Wisconsin, down 10,000.

For the complete 16-minute podcast, click here.