Earlier this month, announcement of the big drop in the May Class III price hardly came as a shock. But the outlook for where prices are going from here may startle some producers.
Even though the warm glow of April's all-time high of $24.31 per hundredweight still lingers, the reality is that record prices were never going to last. In fact, Class III is expected to be $6 less in early 2015.
That's right, $18 milk could be just 9 or 10 months away.
Daily futures prices at the Chicago Mercantile Exchange have been sounding this warning for four months now. In fact, on several occasions prices for early 2015 have been slightly less than $18.
This outlook is more than just disappointing for all milk producers. Dairy owners and consultants have been telling us lately that their average cost of production is between $18 and $19, which means next year already looks like a break-even deal at best.
Corn, soybean and wheat prices have dropped a lot in the last month and may trim feed costs for producers who are running out of old, higher cost inventories. But the bottom line for everyone is the fat margins the industry has enjoyed lately figure to get skinnier and skinnier for at least the next 12 months.
