CLASS III SHOWED SOME STRENGTH while Class IV softened during March trading on the CME. At the beginning of the month, April-to-September Class III contracts netted $18.80 and moved to a $19.10 average per hundredweight (cwt.) by March 23. On the flip side, those same Class IV contracts began the month at $19.40 and slipped to $18.50.

BOTH LATE-YEAR CONTRACTS DIPPED during the same trading window with Class III moving from a $19.80 to a $19.30 average for October, November, and December. Class IV dropped from $20.10 to $19.60.

“WHILE MILK PRICES WILL BE LOWER, 2023 milk prices could be the third highest ever, with 2022 having been a record,” stated Ed Gallagher at DFA’s 25th annual meeting. “However, prices will be lower in spring, and input prices have not gone down very much,” he said.

SPOT PRICES FOR CORN AND SOYBEANS SOFTENED with May corn dropping nearly a dime to settle at $6.32. Soybeans moved much further as prices eased from $14.95 to $14.20 per bushel during March 1 to March 23 trading. Soybean meal slid from $470 to $438 per ton.

“FOR THE FIRST HALF OF THIS YEAR, it’s going to be a struggle,” shared Gallagher of the returns on making milk. “For the second half of the year, there will be some opportunities,” continued the DFA economist.

MILK PRICE RISK MITIGATION has become a must for many farmers. In 2019, only 46% of the nation’s dairy farmers participated in the Dairy Margin Coverage (DMC) program. By 2023, that number climbed to 72.5% of the nation’s dairy farms, the largest in the program’s history.

DAIRY REVENUE PROTECTION (DRP) made equally impressive strides. “From 2019 to 2020, DRP coverage more than doubled, moving from 30 billion pounds of milk (14% of total U.S. milk production) to 64 billion pounds (nearly 30% of total U.S. milk production),” shared Dustin Winston of the StoneX Group. The following states carry the most DRP coverage for milk: Nevada, 64%; Kansas, 49%; Georgia, 45%; and Texas, 40%.

BEEF MAY BE AMONG THE LONE EXCEPTIONS to this year’s market reality that includes rising costs and falling prices. Dan Basse predicts beef will be the big bull market this year, pointing out that the U.S. beef cow herd is at its lowest level since 1962. Basse’s modeling shows that cattle prices will go over $2 per pound later this year or in early 2024.

CLASS III AND U.S. ALL-MILK PRICE correlations slid from 2013-2019’s 98% to 87% in 2020, as shown in the graph. Learn more on page 155.