This year could finally provide an opportunity to rebuild cash reserves following a span of high feed prices and 2009's disastrous free fall in milk prices. Currently, the 2014 All-Milk Price forecast is for a $21 midpoint with a range of $20.60 to $21.40 per hundredweight, projected by USDA economists in its World Agricultural Supply and Demand Estimates. The University of Missouri's Scott Brown agreed that we could reach that prediction this year, during his presentation on milk prices with those attending the 40th Annual Southern Dairy Conference.
"The current 2014 All-Milk Price projections would be a record, and my analysis agrees with the USDA estimates," stated Brown. "Are their risks to reaching it?" he asked rhetorically. "Yes, drought, a domestic supply response to high prices and export issues could all rock the milk price boat."
As for milk production, USDA is forecasting 205.6 billion pounds for this year which would be up 2.1 percent over 2013.
"There is reason to believe that this forecast could hold," said Brown. "Milk production in California and other Western states could be held in check due to an ongoing drought in the region that is limiting water supplies and feed production. But when you send strong, positive signals to make more milk, American dairy farmers and those around the world generally respond," said Brown. "If we get a large supply response in milk production, the high milk prices we enjoy could be short-lived. That includes Oceania," said the Missouri economist.
New Zealand is one of two countries in Oceania, and it is the world's largest dairy exporter. New Zealand matters on the supply side, as does the biggest player on the demand side, China. In fact, Brown noted that, "China is importing over half of New Zealand's whole milk powder. Fluctuations in supplies or demand could have major impacts on prices around the globe."
Brown expects continued volatility in dairy prices; however, there should be a trend of positive returns over the next few years. In addition to weather, supply response and export issues, Brown lists the U.S. dollar's value to other currencies (exchange rates), dairy product consumption trends in growing markets (driven by individual income levels) and population growth as factors to watch.
