‘We’ve Got A Bit of a Mess On Our Hands.’
“We’ve got a bit of a mess on our hands” is the way Mark Stephenson, a University of Wisconsin dairy economist, describes the current dairy market situation in light of the partial government shut down and virtually no dairy market reports being issued.
“We think that when you shut government down, maybe life goes on. But it doesn’t. One of the things the market doesn’t get is information and data. And it needs that to form price opinions,” he says.
Stephenson and Bob Cropp, a fellow economist, painted a bleak picture going forward through 2019 in their January podcast posted this week. Sums up Stephenson, “We don’t see a lot to be optimistic about, but we do see improvement [in the latter part of the year].”
This week, dairy markets took it a on the chin, with virtually all commodities trading lower. There also continues to be a huge, atypical spread between Class III and IV. Usually, Class III prices are above Class IV. Now, however, milk powder is the price driver: Class IV has been trading at $15.50 while Class III is at $14.
Nevertheless, Cropp does see some hope for slightly better prices. He still foresees $16 Class III prices by the fourth quarter, though he acknowledges that still doesn’t provide much relief for farmers’ balance sheets.
He does note that it appears only New Zealand is seeing growth in milk output. And the European Union’s level of intervention milk powder stocks is dwindling and could be sold out by summer. At the same time, export markets remain relatively strong, with Southeast Asia picking up some of the slack left by lower Chinese purchases.
To watch their 11-minute pod cast, click here.