milk price improvement
December 2, 2019

Milk Price Optimism Improves For Next Year

 |  By: Robin Schmahl

The final month of the year is upon us and milk prices have improved immensely since the beginning of the year and improved significantly since mid-year. November will be the high point with a Class III price over $20.00 where it has not been since 2014. For a while, it looked like the December price would be substantially lower, but price has increased about $1.00 per cwt in less than 2 weeks. Although December is nearly half-priced, it will be impacted significantly by swings in underlying cash. 

It is not likely cheese prices will regain all that has been lost since the highs of mid-September and the end of October. How much prices will hold or increase during December is yet to be seen. Much of the demand for the holidays has been met or orders have already have been placed. Buyer interest for cheese will be from last minute orders for unexpected demand and to rebuild aging programs. However, buyer interest for rebuilding aging programs has been limited due to higher cheese prices. Some believe cheese prices will weaken during the first quarter of 2020 and are waiting to purchase on price weakness. 


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As always it is a guess as to price direction during the year. The interesting aspect of the market is that most Class III futures contracts in 2020 slowly improved even though cheese prices showed weakness and continue to improve as the market shows strength. Traders believe prices will hold well and have been and are eliminating the discount futures have been holding to the underlying cash for quite some time. However, that will come to an end as the market balances supply with demand. So far, increasing milk production has not had a negative impact on the market as holiday demand has been strong. Continued growth of milk production as we have seen during the month of September and October does fire a warning shot over the potential for milk prices with current market fundamentals. Continued growth in milk production may result in an oversupply again unless both domestic and international demand improves. 

The inverted barrel/block spread continues to provide support to the market. Barrel manufacturers continue to have a difficult time meeting demand and are behind on orders. We know this will eventually change and barrel price will again fall below blocks, but it sure has provided strong support of milk prices and continues to improve the outlook for milk prices.