Even with milk production on the rise, seasonal demand for butter and cheese for the upcoming holidays is expected to result in stronger milk prices by the end of the year. That’s the assessment of Dr. Bob Cropp with the University of Wisconsin-Extension. In his monthly Dairy Situation and Outlook report, the professor emeritus said barring any set back to restaurants, in-person learning at schools and colleges is keeping cheese sales on a steady pace.
“Milk prices will finish the year higher, which is good news for dairy farmers,” Cropp said. “Class III could improve to the high $18s for November and December. Current Class III futures are higher reaching $19 for both November and December. Class IV could also be in the $18s for November and December.”
One of the factors Cropp is keeping an eye on is how much milk is being produced. Though it is true that year-to-year production has been going up, the pace of the increase has slowed and is expected to continue to do so for the remainder of 2021.
“Milk production during the second quarter was 3.7 percent higher than a year ago. But since then, the growth in production has slowed. July’s production was up 1.9 percent, but August was up just 0.6 percent and September 0.2 percent.”
In addition, milk cow numbers declined 25,000 from August to September and by 85,000 from its peak in May.
Meanwhile, dairy exports are also having a positive impact on the market for U.S. dairy producers. The volume of August exports was 13 percent higher than a year ago–marking the seventh straight month of growth.
As for next year, the former professor foresees the growth in total U.S. milk output at less than 1.5 percent. And higher feed and labor costs could result in dairy herds culling more lower producing cows.
“The high cost of building materials will dampen dairy expansion decisions,” he predicts. “Milk cow numbers will likely average below 2021. And dairy exports are forecasted for some growth over 2021.”
No matter what happens in the markets, Cropp encourages producers to consider one of several price risk management tools to protect profits when opportunities occur.
Source: Wisconsin Ag Connection