In your August issue . . .

A WEAKENING ECONOMY AND INFLATION have begun to threaten dairy demand, and that impact was felt in the futures markets. On June 1, August-to-December Class III contracts averaged $23.50, and the same five months yielded a $24.75 Class IV average. By August 11, the five-month averages were $20.70 for Class III and $22.30 for Class IV.

PRICE PROSPECTS LOOKED SIMILAR in New Zealand as the eight dairy categories fell by 5% in back-to-back trading sessions at the Global Dairy Trade (GDT). Overall, prices were down in nine of 10 every-other-week trading sessions dating back to March 15, 2022.

COVID-19 LOCKDOWNS IN CHINA have been pulling down demand for milk powder for the world’s largest dairy product importer. As a result, spot nonfat dry milk fell to a 10-month low at the CME.

JULY MILK CHECKS REMAINED STRONG, HOWEVER. Class II set a new record once again, albeit just one penny over June’s $26.66. Class IV fell 4 cents from June’s record to net $25.79 in July. Class III moved the most, dropping $1.80 to land at $22.52 per hundredweight.

CONTINUING THEIR RECORD PACE, U.S. dairy exports pushed past $800 million in sales for the fourth straight month in June. Overall, American dairy exports were valued at $4.75 billion in the first six months. That was up an impressive 27% compared to last year.

WHILE MOST U.S. PORTS HAD CAUGHT UP, backups reappeared at the Port of Savannah. In early August, 40 vessels were waiting to berth at the nation’s fourth-largest port. There also was unrest among West Coast dock workers. Both are concerning as peak shipping season approaches.

INFLATIONARY PRESSURES BACKED OFF A BIT as the Food and Agriculture Organization’s (FAO) Dairy Price Index averaged 146.4 points in July, down 2.5% from June. However, that index was up 25.4% from last year. Tight global dairy prices have sustained prices.

THE WALL STREET JOURNAL reported a similar story, suggesting that food prices may have peaked. As a point of reference, Danone and Nestlé raised food prices 7% to 8% compared to last year. Unilever was up 11%.

FEED PRICES COULD EASE as corn, soybean, and other grain prices have fallen throughout the summer when compared to spring highs.

AS MILK AND FEED MARKETS SOFTEN, it will be important for dairy producers to look at options such as the Dairy Margin Coverage (DMC) program, Dairy Revenue Protection (DRP), or other risk mitigation tools. For more on the margin forecast shown in the chart below, turn to page 396.