University of Wisconsin's Bob Cropp and Mark Stephenson
April 24, 2017

Wisconsin Economists Temper 2017 Milk Price Forecast

 |  By: Jim Dickrell

An early spring flush and sluggish commodity prices have caused University Wisconsin dairy economist Bob Cropp to temper his 2017 milk price forecast.

Cropp has now pegged the Class III price to average $16.40/cwt for the year, down about $1 from what he was predicting earlier in the year. The United States Department of Agriculture’s projection is $16.10 to $16.50.

Cropp does note that the March milk production  increase, up 1.7%, is actually slower than some of the increases in January and February. But cold storage numbers show inventories of cheese and butter running well above a year ago, which suggests sales aren’t as robust as they could be given current commodity prices.

There has been a convergence of U.S. and world prices, which suggests U.S. exports should continue to pick up speed. “I’m hopeful we may have sales in the works that we were not seeing in the secondary data,” says Mark Stephenson, a colleague of Cropp’s. “Whenever everybody realizes we made some sales, we can watch products being drawn down inventory. When that happens, prices will start to rebound.”

But Stephenson notes he has never seen a time when plant capacity in the Midwest has been stretched as tightly as it is now. “I’ve never really seen a time quite like this when farmers either get dropped from a plant that closed or something to that effect , that they didn’t have somebody else waiting right there to take the milk,” he says.

Two things are going on, he says. First, plants simply don’t have the capacity to handle more milk. And second, plants don’t want to make dairy products for which they have no market.

Both Cropp and Stephenson see May as the bottom of the milk market, with prices rebounding in June and July. Cropp sees Class III prices climbing back over $16/cwt in July and reaching the $17/cwt level in the fourth quarter.

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