October 6, 2017

Milk Prices: Short-Term Opportunity, Long-Term Risk

 |  By: Anna-Lisa Laca

Milk production continues to grow in the U.S. While milk prices haven’t been extremely favorable for U.S. producers, feed costs have been. As usual producers are trying to increase their revenue through volume as prices struggle. At the same time, producers in the European Union and New Zealand have also ramped up production on the heels of significant price incentives. All that adds up to long-term milk price risk.

“As we look forward we’re not only going to experience larger production in the U.S. in the coming 6-9 months, but we’re going to see that compounded by growth in the E.U.,” Mike North of Commodity Risk Management told AgDay’s Betsy Jibben at the World Dairy Expo on Thursday. He says the growth in both the U.S. and EU will be added to by NZ who is also experiencing a period of production growth.

“The world will be flooded by milk as we get to next spring, at that time I see some real risk in the markets,” North says.

Currently, U.S. milk markets are in their traditional holiday seasonal buying mode which North says could lead to price opportunities in the next 6-8 weeks. He advises farmers to take advantage of those prices before they’re gone.  

“Short term, we have some opportunity for milk price despite production,” North explains, “but, as we go forward that expanding milk production here and around the world will be a problem.”