Unlike the swimmers who will be racing across the pool during the Olympics this summer, it appears U.S. milk prices are more likely to be bobbing in the water, at least through the first part of the year.

“Our milk price is treading water at the moment, waiting to see what happens,” said the University of Wisconsin-Madison’s Leonard Polzin during the January Hoard’s Dairyman webinar. He pointed to more domestic demand, greater international demand, and supply disappearance as factors needed to support higher prices.

There is not a huge amount of forward curve on the CME for Class IV prices, so it appears Class IV milk will sit around $19.50 per hundredweight through August. Class III has somewhat of a forward curve, Polzin noted, but for the first eight months of the year, prices only look to average $17 per hundredweight.

Polzin said that the gap between Class III and Class IV prices is wider more often now than we have seen historically, and he doesn’t anticipate the two prices will align any time soon. That’s because the product categories — cheese and dry whey for Class III and butter and nonfat dry milk for Class IV — seem to be operating as independent markets and are not as linked as they were in the past.

“If that is the case, producers selling into either the Class III or Class IV market will see a notable difference in their milk checks,” Polzin said.

November was the first month in 2023 when margins in the Dairy Margin Coverage (DMC) program were above $9.50 and did not trigger a payment, but Polzin said he would not be surprised if payments came in the first few months of the year as we enter a period of historically lower prices in January and February. He noted that the enrollment period for DMC has yet to be announced for 2024.

Polzin acknowledged that 2023 was a challenging year for the vast majority of producers, and 2024 appears to have a lot of burdens as well. “All in all, it is going to be somewhat of a tight year. There is not a huge amount of upside to jump into,” Polzin concluded. “Hopefully it is not as bad (as 2023), but we need to see a lot change on the demand side for this story to paint a better picture.”

To learn more, watch the January Hoard’s Dairyman webinar, titled “The dairy situation and outlook for 2024.” This webinar was sponsored by QLF.