This welcome subject line appeared in my email box a week ago, a response to last week’s Intel item about how Class III milk futures prices are looking much better for the last eight months of the year, averaging $16.40 per hundredweight.

It felt good to write that things will improve for milk producers the next eight months, but it felt really good to have a leading analyst like Jerry Dryer at JDG Consulting in Madison, Wis., say he expects things will be even better.

Thank you, sir.

“Low prices for the year are clearly in the history books,” said Dryer. “Prices of all products and milk will increase; albeit in a choppy fashion through at least the third quarter.”

His outlook is especially strong for this fall. He sees a $16.93 Class III average the last four months of the year, with these individual monthly prices:

September – $16.83
October – $17.15
November – $16.98
December – $16.77

He said slowing milk production growth, both in the U.S. and globally, as well as shrinking dairy product inventories, have “dramatically” eased downward pressure on product prices.

Feed quality due to a late spring in some regions, sluggish production per cow, and softening cow numbers are working in prices’ favor.

“Cow numbers are fading in the Upper Midwest and Northeast,” said Dryer. “Smaller herds are being liquidated faster than cows can be added to larger herds. My crystal ball sees more of the same — herds with less than 1,000 head disappearing and larger herds getting larger.

“Bottom line: Cow numbers will decline until midyear, production per-cow growth will hover around 1 percent, and total milk production will be up 1.1 percent during 2018.”

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(c) Hoard's Dairyman Intel 2018
May 21, 2018
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