The continuous rise in milk production and lack of export demand will keep dairy prices from fluctuating much for the foreseeable future. University of Wisconsin-Extension expert Bob Cropp noted in his latest Dairy Situation and Outlook report that the Class III price is expected to decline to the high $15’s for the remainder of the year and may be the low $15’s during first quarter of next year before they slowly increase later in 2016.
“USDA forecasts total milk production for this year to end up 1.4 percent higher than last year and expects another two percent increase for 2016,” he noted. “This will be a little high if the increase in milk production continues at less than 1.0 percent. But, yet even with milk production at these levels and for exports not to show much improvement prior to the second half of 2016.”
Cropp says USDA’s release of milk production for August showed the smallest increase of the year so far. Milk cow numbers have held at 9.3 million for the past three months, which is down by 3,000 from the peak this year in May. And milk per cow continues to show only a modest increase.
On the Chicago Mercantile Exchange, butter was $2.29 per pound during the last week of August, but has shown strength all of September with the current price at $2.75. With both butter and nonfat dry milk prices improving, the September Class IV price will be near $15.10 compared to $12.90 in August.
“But, cheese and dry whey prices have weakened. The 40-pound cheddar block price was $1.6575 per pound the last week of August, improved to $1.75 on September 1, but is now $1.69,” he stated. “Cheddar barrels were $1.60 per pound the last week of August, improved to $1.67 on September 1 and is now $1.54. Dry whey which was $0.38 per pound mid-August has fallen to $0.25. With these lower prices the September Class III price will be about $15.85 compared to $16.27 in August.”
Meanwhile, dairy exports are not expected to improve prior to the second half of 2016. With China and Russia–the two largest importers of dairy products–importing much less dairy products than early in 2014 along with the level of world milk production world dairy stocks have built to surplus levels. World dairy product prices have fallen to levels not experienced since a decade ago and well below U.S. prices.
Source: Wisconsin Ag Connection
