Remember, the federal government tickers with the price using complex formulas that weigh supply and demand.
- The underlying facts behind the price decline in the USA is an oversupply of milk in the United States
- Whey exports have been positive all year with January-October exports up 8 percent from the previous year. Dry whey exports are 11 percent higher year-to-date fact reaching all-time high volumes this year because of steadily declining global prices. China has been a big buyer of whey. Yet, that still has not been enough to support prices. There is a plentiful supply with strong cheese production keeping supply available. Traditionally, low prices should stimulate demand and eventually result in higher prices. But remember, the record prices of last year prompted a lot of farmers to add more cows, and U.S. milk production rose — while U.S. consumption of milk, cheese, yogurt and ice cream has remained more or less steady.
- The European Union has lifted milk production caps- selling milk products to traditionally USA buyers- Mexico and Canada. Remember, the over-production of milk is world-wide, not just a USA problem.
Both the highs and lows are part of a price cycle that runs roughly every three years,
The high prices last year made farms “amazingly profitable,” especially because the price of corn for cattle feed, was low.
One theory is product is coming out of storage because processors think the market has not yet seen “the bottom”. High volums on the spot trade tends to support this- yesterday 11 loads of barrels sold and the spread tightened with blocks to 9 cents.
I know you’ve read this, but yesterday first quarter 2018 Class III prices dropped, on average, 32 cents. All three contracts of the first quarter are near $14. The February contract finished at $13.88, the first time any of these contracts have closed below $14. The first half of the year now rests at $14.33, down 21 cents from Friday’s average finish. The whole year of 2018 moved below $15 on its average for the first time, to $14.94 per cwt.
Last week, USDA estimated Class III milk price to average $15.70, Class IV to average $14.35, and the 2018 All-milk price range from $16.65 to $17.45 per cwt. for an average $17.05 on the recent World Agricultural Supply and Demand report. A survey of dairymen attending our Dairy Directions program early in December showed their current average “break-even farmgate price” at $17.10 per cwt.- any increase in feed costs or down pressure on milk price puts them in the red.