After being in a constant climb since May’s opening forecast, USDA economists shaved $1.65 off the agency’s All-Milk price projection for 2023. That’s according to data released in the August 2022 edition of the World Agricultural Supply and Demand Estimates.

The change in the All-Milk price projection took a double hit due to lower forecasts for both Class III and Class IV prices. While still the highest projection of the tandem at $20.35, the Class IV price forecast fell by $1.95, moving from $22.30 to $20.35. Meanwhile, Class III slipped by $1.15, moving from July’s $20.85 to $19.70 this August.

The reduction in forecasted prices comes from an estimate for higher milk, as USDA economists raised the 2023 milk production forecast by 900 million pounds. If that came to fruition, U.S. dairy farmers would produce 229.2 billion pounds of milk in the upcoming year.

Overall, many commodities, including grain and milk, reached historic highs earlier this year. However, prices began to slip as investors have seen market signals indicating inflation may ease. Overall, commodities garner extra interest from traders and investors to counteract rising prices.

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. DMC and DRP can help ensure milk revenue while allowing producers to capture upside price movement should milk prices move upward as took place in 2022.

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(c) Hoard's Dairyman Intel 2022
August 18, 2022
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