June 15, 2016

Milk Prices to Increase on Corn Market's Heels

 |  By: Anna-Lisa Laca

The dairy market has seen steady climb over the last few weeks. In the last week it’s been more of a “punch” higher, according to Bryan Doherty of Stewart-Peterson. He says dairy producers can look for increasing corn prices to continue to test on-farm margins despite the improving milk price.

“We’re now 15-18% higher in value and the markets rests at its highest point since the last part of the fourth quarter,” Doherty told “AgDay TV” host Clinton Griffiths.

The milk market could be increasingly volatile over the next few months, according to Doherty.

“We’ve got new life in a market that’s got a lot of supply,” he said.  “Watch what corn does, milk usually tries to follow.”

Stewart-Peterson, the firm Doherty works for, recently completed a probability study on the grain markets and found there’s potential for extreme volatility ahead for end users.  

Doherty said the firm looked at index history to the current July futures contract price.

“We looked at once the low was inn during fall, after January 1, where does history show us prices should go,” he said.

The study showed the following:

  • 100% probability of $4 July Corn
  • 76% probability of $4.50 July Corn
  • 46-48% probability of $5 July Corn

“You’ve got about a 50-50 shot of yet seeing $5 corn yet this year,” he said.

Doherty encouraged producers to use the risk management tools in their toolbox to protect margins.

“If I’m a dairy producer, I want shore up the bottom side prices for milk,” he explained. “But I also want to realize grain prices could accelerate upward if this weather doesn’t cooperate.”    

Watch the full segment of “AgDay TV’s AgriBusiness” below: