Optimism Wanes For Stronger Milk Prices This Year, Next
Continued strong milk production here and slowing exports have sucked the wind out of the sails of higher milk prices.
“We haven’t gotten a lot of information to push prices one way or the other,” notes Mark Stephenson, a dairy economist with the University of Wisconsin.
“Exports have dropped off, production is increasing and [domestic] demand isn’t quite as strong as we thought,” adds Bob Cropp, also a dairy economist with the University of Wisconsin. “These are all little things, but they’re enough to knock $1 off milk prices.”
Both Stephenson and Cropp were forecasting $17 Class III prices for the fourth quarter of 2017 and into 2018. “That’s not going to happen unless we get a rally,” says Cropp.
Stephenson notes that most retailers have already finished up their holiday buying for the year. Exports have also slowed this summer, the first time that has happened in 12 months. The U.S. has seen it first decline in milk powder sales since June of 2016.
An October rally is not unprecedented. Last year, cheese went from $1.50 in early October to $1.92 in November, pushing Class III prices from $14.50 to $17.40. But buyers would need a reason to come back into the market, and it would likely have to come from export sales. Prospects for that aren’t great, say both economists.
View the entire Stephenson/Cropp podcast here.