Most dairy economists are predicting a better year in terms of milk prices, including the University of Wisconsin-Madison’s Mark Stephenson. He shared his predictions for 2022 during the January Hoard’s Dairyman webinar.
“I’m really looking at a pretty substantial increase from where we were last year,” said the director of dairy policy analysis at the university. He estimates a $22 average All-Milk price, which would be $2 to $2.50 higher than in 2021 when the average All-Milk price was $19 per hundredweight. Although there could be some swings in the price due to volatility, he expects the price to remain relatively flat through the year.
There is a catch, though, in the form of elevated input costs.
“It could be a good milk price year, as long as costs of production are not too high,” he explained. “If you have adequate feed in the bunk that you produced and harvested, it might be a decent year.”
In parts of the country where farms tend to purchase more feed inputs, this is where Stephenson said margins will be particularly thin. On the other hand, in places where there is plenty of feed and it is of high quality, it will make it attractive to produce more milk.
Stephenson said one input to watch will be fertilizer, and he wondered if more farms would draw on banked fertility in the soil and utilize less fertilizer on crops. Or, he said maybe we will see a shift toward more alfalfa and less corn silage in rations, since corn requires more fertilizer. At this point, we don’t know where the trends will go.
Even with improved milk prices in the forecast, Stephenson said, “Continue to look at risk management options.” He advised farmers to watch for ways to control variable costs of production and to put a floor under price opportunities when they present themselves.
“Some farms will have pretty good margins, as long as they keep input costs relatively low,” he reiterated. To learn more, watch the January Hoard’s Dairyman webinar, “The dairy price outlook for 2022: A spotlight on supply, demand, and inflation.”