The past year has not been a profitable one for most dairy producers. And according to University of Wisconsin-Extension expert Bob Cropp, that trend may not change anytime soon. In his latest Dairy Situation and Outlook report, Cropp says the continuous rise in total U.S. milk production means that supplies are still exceeding demand–despite the fact that holiday orders for dairy products were strong in recent weeks.
“Good cheese and butter sales have held prices in early December… but orders for strong holiday sales have been filled so orders for additional product is now much lower,” Cropp noted.
However, he says there is a silver lining as the momentum behind increased milk production is slowing down. Cropp stated that eight of the 23 reporting states showed a decrease in output in 2015; and the overall percent-increase in production for the year was lower than in 2014.
“The biggest relative increase in milk production was South Dakota at 13.1-percent, followed by Wisconsin at 4.3-percent,” he said. “But, the combined increase of South Dakota, Wisconsin, Iowa and Minnesota of 142 million pounds did not offset the big decrease in California.”
The professor emeritus says he is hopeful that cheese prices have bottomed out and could show some strength over the next month or two. But he predicts that butter prices will likely decline going into the new year.
“With these lower dairy product prices the December Class III price will be about $14.50 compared to $15.31 in November,” he said. “The Class IV price will be about $15.79 compared to $16.48 in November. But, unless prices do rally, which is not likely over the next couple of months, we could see the Class III price in the low $13s during the first quarter of next year and the Class IV price below $13.00.”
Cropp says low milk prices mean that cow slaughter will be higher than a year ago and with increases in milk per cow reduced, production may show little or no increase over a year ago for the first half of next year.
