January 12, 2017

Lock In Profitable Milk Prices Now

 |  By: Anna-Lisa Laca

Last year was a tough one for dairy producers across the country. As the second half of 2016 came to a close milk prices started to improve, providing some relief.

“It looked pretty tough for a while and then prices recovered,” Bryan Dohertyof Stewart-Peterson told AgDay host Clinton Griffiths on Wednesday.

Milk prices recovered on declining world production and increasing world demand: Ironic for American producers who actually increased milk production in 2016. While prices aren’t fantastic, they are helping most producers break even, Doherty said.

“Nobody is flipping cartwheels making money hand over fist,” he said. Big dairies are adding more cows and smaller dairies are going out of businesses, he added.

When it comes to predicting what milk prices will do in 2017, Doherty’s attention is turned to the dollar. While a strong dollar boosted milk prices in 2016, that isn’t always the case.

“We saw cattle, dairy and pork all move up with the dollar, soybeans included which is odd,” he said. “There’s always a catch up phase, demand doesn’t shift overnight.”  

Take Action Now

Currently producers have the opportunity to sell milk on the futures market for a good price. “Recognize that what goes down comes up and what goes up could come down,” he said. Doherty recommends producers sell a quarter to a half of their milk next year and then buy a call against it. “Get yourself positioned so that you’re well prepared in case prices tip over,” he said. “The speed at which markets tip over isn’t always lightning fast but it’s like trying to catch a falling knife. It’s hard to do.”

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