Declining Prices Expected, But Still Favorable Margins

April 23, 2014 — Milk production didn’t jump that much in April,  reported at 1.1 % in the major dairy states from a year ago. One reason for the modest increase could be that dairy

Bob Cropp, Professor Emeritus, University of Wisconsin

Bob Cropp, Professor Emeritus, University of Wisconsin

producers are still recovering from the depressed prices in 2009, along with the high feed prices in 2012-13.

“They’re paying off bills rather than expanding,” said University of Wisconsin’s Bob Cropp. “We’re seeing a delay in production response we would normally expect with these kinds of margins.”

March Milk production was down in Wisconsin, Minnesota and Iowa due to forage quality. Production is expected to pick up when new hay and other feed crops despite the slow increase in cow numbers.

“That has slowed the increase in production that we thought earlier,” he said. “I don’t see 2% growth until the last half of the year.”

Meanwhile, milk prices are expected to ease down from the record $24+ Class III price in April. As production picks up and world prices decline.

“It looks like a crash as we’re looking at $24 Class III that may end up at the end of the year at $18, but that’s still higher than the average we had all of last year.”

World stocks remain tight because all the major exporters had milk production problems last year. Demand was very strong, led by China.

“It’s going to take a while to build those stocks up,” Cropp said. “They’re still good prices but everything is coming down from the record highs, but we’re still looking at very favorable margins.”

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