“High milk prices won’t look as good as they have in the past, as rising costs and difficulties in processing and marketing continue through the new year,” shared Roger Cryan, the chief economist with the American Farm Bureau Federation. “They will sure beat the alternative, though,” Cryan continued in his Milk Check Outlook column for the January 25, 2022, edition of Hoard’s Dairyman.
Indeed, inflation has soared skyward, reaching 40-year highs because the U.S. money supply that has grown by 41% since February 2020 is out chasing goods and services. That situation, and the global health pandemic that induced the loose money supply, is largely responsible for bottlenecks and supply shortages we are all experiencing now.
Cryan is right, however.
Even though feed costs and crop inputs seem to move upward every day, thankfully those expenses are offset by the prospect of higher milk prices for the foreseeable future.
Class III futures have climbed 11% since the CME close on November 1. Back then, the bundle of January to October Class III contracts averaged $18.63 per hundredweight (cwt.) At the close of trading on January 7, that same group of contracts traded at $20.58 per cwt., which was $2.05 higher than early November.
Many global markets have been showing improvement and that has helped Class IV ingredient prices that have been consistently trading above their Class III cheese counterparts. In early November, January-to-November Class IV contracts on the CME averaged $20.65. A short two months later, those contracts netted $21.84.
Butter has finally made a move, too. U.S. butter had been trading at values well under those in both New Zealand and the European Union . . . the two largest global exporters next to the United States. In early December, butter began bounding toward a four-year high. Starting in December, butter added 51 cents per pound to reach $2.49 by January 3. In the next three days it leapt to $2.74-1/4 per pound.
Whole milk sold at retail also posted the best price since its record year of 2014 by selling for a $3.66 per gallon average, according to data assembled by federal market order administrators. The 2014 record was $3.84.
Milk checks to do look better for the foreseeable future. Even so, everyone who milks cows for a living will also have to be ever watchful on the rising costs.