In your May 25, 2019 issue . . .
CLASS III FUTURES APPROACHED THE $16.70 RANGE for June to December 2019 contracts on the CME. September and October represented the market high, trading near $17, with June being the market low at $16.55. Class IV June to December futures averaged $17.25.
AT THE SAME TIME LAST YEAR, Class III contracts had averaged $16.70 for the final seven months. Then tumultuous trade conditions ensued, sending futures and subsequent milk checks in a downward spiral.
THOSE SAME CONDITIONS still exist this time around. However, traders have factored trade into the marketing equation so ongoing tensions with Mexico and China, two of America’s top trading partners, should not create further shock to milk markets.
ONE UNFOLDING SITUATION COULD SHOCK MARKETS: The unprecedented contraction in China’s swine herd due to the outbreak of African Swine Fever. With fewer hogs, there could be a lower demand for feed ingredients including: milk permeate, whey permeate, whey powder, and lactose. Downward pressure on whey prices could stymie milk checks.
DESPITE THIS POTENTIAL, prices at New Zealand’s Global Dairy Trade platform climbed for the eleventh straight market session, dating back to December 4. But not all products traded higher, as lactose, whole milk powder, butter milk powder, and Cheddar prices fell.
LESS MILK AND LESS PRODUCT also have weighed on the market forecast as U.S. cheese production posted the third straight monthly decline this March. In the top two cheese production states, Wisconsin’s output fell 0.7 percent while California’s cheese production dropped 3.1 percent.
AS MILK PRODUCTION CONTRACTS, plant managers in Michigan, a state that had been leading U.S. milk growth, reported that some dairy processing plants are now operating slightly under capacity. That is partially due to the fact that 13.1 percent of Michigan dairy farmers called it quits last year, an exit pace continuing this year.
MICHIGAN’S DAIRY FARM LOSSES mirror trends in Wisconsin. Last year, the Badger State lost 6.5 percent of its dairy operations. That number started approaching 9 percent in March 2019.
HOW BAD ARE THE FINANCIAL CONDITIONS? “There is a real shakeout in part due to a $10 range in the cash costs related to milk production in Wisconsin,” reported UW-Madison’s Mark Stephenson.
“THERE ARE FOUR GROUPS OF DAIRY FARMS,” he said. “Summarizing discussions with ag lenders around the country, about 20 percent of farms have cash flowed right through this trough; 30 percent have had to borrow more; another 30 percent have had to restructure loans; and as many as 20 percent are in financial trouble they may not recover from.”
In your next issue!
POSITIVE NEWS ABOUNDS ON WHOLE-MILK DAIRY FOODS.
Due to emerging science, the health and wellness community has began to advocate for flexibility across the fat spectrum for milk, cheese, and yogurt.
ENCOURAGE COWS TO EAT.
Through facility design, stocking density, feed quality, and continuous feed access, we can optimize a cow’s eating behavior.
DON’T GET STUCK IN COMPARISONS.
No two dairies function in exactly the same way, and by understanding the strengths and weaknesses of your own operation, you can create a plan that will work for you.