Agriculture commodity prices have been all over the board as markets adjusted to a variety of factors brought on by COVID-19. Perhaps no commodity market has covered more ground than Class III future prices. Those prices dropped 35% from January to the end of April. From there, they have recovered to pre-pandemic levels.

Only ethanol, Class IV milk prices, and hogs have seen greater losses than Class III. None of those have recovered as far as Class III has. Numerically, the top of the curve, which occurred at the end of January, had June future prices at $17.80. On June 1, Class III prices reached $18.79.

“As we look across the agriculture commodities, Class III milk prices is the only product that’s back to pre-COVID prices, which I think is a testament to all of us in agriculture,” explained International Dairy Food Association’s (IDFA) Michael Dykes.

As the graph supplied by the American Farm Bureau Federation shown below indicates, all commodities have undergone variations of the market fluctuations. Wednesday, May 27 DairyLivestream special guests Dykes, Jim Mulhern, National Milk Producers Federation (NMPF), and Cornell’s Andy Novakovic discussed some of the contributing factors.

“What we’ve seen is that the base excess plans that many cooperatives have put into place have had very positive impacts on curtailing the growth that we were seeing, so it has been helpful,” Mulhern said. “We’ve also seen the government step in and buy more product than they were originally intending to, and we’ve seen food service come back a little bit stronger. The issue comes down to a supply and demand balance that we’re trying to achieve.”

Dairy economists expect markets to continue to be ruled by uncertainty and fluctuation throughout the summer. Supply management, government purchases, and restaurant traffic will all contribute, but general movement of the economy and exports will also factor in.

An ongoing series of events
In June, DairyLivestream will begin airing twice each month for the remainder of this year. The next broadcast will be on Wednesday, June 10 at 11 a.m. CST. Each episode is designed for panelists to answer over 30 minutes of audience questions. If you haven’t joined a DairyLivestream broadcast yet, register here. Registering once registers you for all future broadcasts.

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(c) Hoard's Dairyman Intel 2020
June 4, 2020
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