After a milk price year for the ages in 2014, producers knew 2015 would be worse. And it has been so far.
But low feed and high beef prices have made it manageable, and indications are growing that this roller coaster won't be too bad.
March, April, May and June figure to be the worst of the price picture, according to both Class III futures prices and the latest outlook by Rabobank. Prices for those months currently range between $15.10 and $15.55 per hundredweight, while prices in the fall are over $17.
Income over feed cost (IOFC) margins measure the bottom line for dairy owners, and Rabobank analyst Tom Bailey says that while they will decline, they won't be terrible.
He does expect margins will spend most of 2015 below the $8 per hundredweight yardstick he uses as a break-even for producers – but not by a lot.
Bailey sees IOFC dipping to a low of about $7 this spring, and then gradually recovering to $8 by October or so. He thinks margins will be up to $9 by January 2016.
He expects the recovery to be driven by global declines in cow numbers and total milk production. In the U.S., he predicts that both will happen in California first.
And while U.S. milk prices should rise in 2016, Bailey expects world prices will improve first, just as they dropped first in 2014.
(c) Hoard's Dairyman Intel 2015
March 30, 2015
