As we switch gears into a new season, it is a good time to look at the current dairy situation and estimate what might happen in the months ahead. Expectations for the summer was the topic of discussion on a recent episode of the Ever.Ag “Parlor to Plate” podcast.
After an April Class III milk price of just $15.50, prices are moving upward, bringing relief to farmers in regions with heavy Class III utilization. According to Ever.Ag’s Matt Tranel, producers in those areas are enjoying the improved prices and hoping they stick around.
The dairy agent and broker said that milk production has been and continues to be the dairy industry’s biggest watchpoint. While production is still down year over year, milk supplies have been stronger than anticipated, he noted, with certain states, such as Wisconsin, making strong gains. On the other hand, areas dealing with avian influenza are seeing a negative impact on production. Upcoming heat stress risks will also be a factor. “We will see how that plays out in coming months,” Tranel said.
He noted that replacement heifer supplies remain low and costs are high, making this another watchpoint to keep a pulse on. “You can get cows and heifers, if you are willing to pay the price,” he said. He noted quotes of $2,500 to $3,000 per head, and he said some farmers are adjusting their culling schedules and not sending cows to market nearly as quickly rather than buying replacements.
Between milk prices, milk supply, and heifer inventories, Tranel said, “Volatility is going to be around this summer.”
Jim Matthews also forecasted optimism with a chance of volatility when it comes to feed supplies and pricing.
“Adverse weather, not just through planting but through summer development as well, can have an impact on pricing,” noted the vice president of Ever.Ag’s feed and dairy producer division. “Those buying corn and protein need to keep an eye on this as we push through the next month or so.”
The planting season brought wet conditions for some regions, but he said there is optimism in the air once we get through the hurdles of the planting season.
“Things are aligning for the dairy producer to buy significantly cheaper feed this fall than the last two to three marketing years,” Matthews said. “We are cautious to say it is happening, but the stars are aligning. Where we sit right now is already better than what we dealt with the last two to three years.”
On the dairy product front, both cheese and butter have been enjoying higher prices. In fact, according to Jon Spainhour, butter prices are exceptionally high, especially for this time of year, reaching $3.12-1/4 per pound in late May. Stocks are still in good shape, and the U.S. price is in line with the rest of the world, so butter prices may fall back to earth, he noted. However, if prices go much lower than world prices, that opens the door to exports, and Spainhour said, “That can bring prices right back up.”
Exports hit record levels for cheese in March, and April will likely be similar, Spainhour said. Strong exports took cheese out of the domestic supply, and prices skyrocketed to over $2 per pound in a pretty fast fashion, he explained. That, paired with some finished goods production issues, created an “explosion of prices,” the Ever.Ag dairy broker said.
With higher prices, exports could slow, which would put more products into the domestic market and pull back prices. As such, volatility remains on the product price side as well.
