"We are at the peak of our milk price cycle," said the University of Wisconsin's Mark Stephenson when discussing current milk prices. "We will likely experience a significant downturn in prices by December with an All-Milk price approaching $19 by year's end," noted the ag economist. This would be down substantially from April's record Class III price of $24.31 per hundredweight.
Even though prices may soften by year's end, 2014 will go down as a great year. "The 2014 average milk price will still be $2.50 above the 2013 average," said Stephenson, noting that these prices would represent a record for the year.
What could 2015 hold?
Stephenson is projecting that 2015 will look a lot more like 2013. That year, mailbox prices - the actual prices dairy producers received for milk - averaged $20.06 per hundredweight.
There are a number of factors that could alter this forecast.
"While farms have all the signals they need to tell them the market wants more milk, they've been slow to respond," said Stephenson. "Recently, farmers have been holding back cows from culling and there will soon be adequate heifers in the pipeline even with record beef prices," Stephenson noted as he explained this could lead to more milk production in the coming months.
There is one other mounting concern. "The drought area in the West represents one-half of the U.S. milk production," said Stephenson, noting that dry conditions could impact milk production and feed availability.
What about long-term dairy-product demand?
"We must remember that prosperity is driving food demand, not world population growth," concluded Stephenson.
(c) Hoard's Dairyman Intel 2014
May 12, 2014
