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Good dairy news: Milk price cycle is near-bottomGood dairy news: Milk price cycle is near-bottom

While being "near bottom" of any cycle isn’t best news, it’s a clue better milk prices may come this spring.

John Vogel

February 12, 2018

2 Min Read
HOLD THE MILK: U.S. consumer demand may help bring mailbox prices off the bottom this spring — if national production doesn’t grow too much.

Two of the nation’s top dairy economists recently shared their crystal ball forecasts at Cornell University’s Agricultural and Food Business Outlook program. Unfortunately, Andy Novakovic, director of Cornell’s land grant programs, and Mark Stephenson, director of dairy policy at University of Wisconsin, had little good news to share.

But little as it was, there was some good news to share: “We may be at the bottom or slightly off bottom of the dairy cycle,” Novakovic said. Is that pre-bottom or post-bottom? He didn’t say. “Yes, we still have milk cycles. But they’re bigger and more volatile and wider than in the past.”

Stephenson indicated that the Margin Protection Program margins would drop about $6 over the next few months. The MPP-Dairy offers protection to dairy producers when the difference between the all milk price and the average feed cost (the margin) falls below a certain dollar amount selected by the producer.

The strong U.S. economy will help boost dairy consumption, Stephenson added. The world supply of milk fat is tight. The milk cycle is halfway through for the Southern Hemisphere, Oceana in particular.

Right now, what happens in the E.U. is the market driver, they say. Heavy E.U. inventories of dried milk products, plus the expected EY milk production increase this year, will hold down the upside.

The E.U. is currently the world’s largest exporter of milk powder. Last year, it moved 50% more powder onto the world market than the U.S.

2018 price impact?
Class III milk for 2018 is expected to average $1.35 a hundred below 2017, Stephenson said. Class IV milk may be $0.85 a hundred lower. The all-milk average may be down $1.55 from 2017.

The good news may be that milk prices tend to move upward from spring into summer, which could bring some relief.

As Penn State’s dairy analyst Rob Goodling pointed out in December’s Dairy Outlook, the 2018 cost of production on Pennsylvania dairy farms would need to be below $17.50 per hundredweight to cash flow. Even that cost of production won’t provide much profit margin at the current forecast 2018 Class III prices.

About the Author(s)

John Vogel

Editor, American Agriculturist

For more than 38 years, John Vogel has been a Farm Progress editor writing for farmers from the Dakota prairies to the Eastern shores. Since 1985, he's been the editor of American Agriculturist – successor of three other Northeast magazines.

Raised on a grain and beef farm, he double-majored in Animal Science and Ag Journalism at Iowa State. His passion for helping farmers and farm management skills led to his family farm's first 209-bushel corn yield average in 1989.

John's personal and professional missions are an integral part of American Agriculturist's mission: To anticipate and explore tomorrow's farming needs and encourage positive change to keep family, profit and pride in farming.

John co-founded Pennsylvania Farm Link, a non-profit dedicated to helping young farmers start farming. It was responsible for creating three innovative state-supported low-interest loan programs and two "Farms for the Future" conferences.

His publications have received countless awards, including the 2000 Folio "Gold Award" for editorial excellence, the 2001 and 2008 National Association of Ag Journalists' Mackiewicz Award, several American Agricultural Editors' "Oscars" plus many ag media awards from the New York State Agricultural Society.

Vogel is a three-time winner of the Northeast Farm Communicators' Farm Communicator of the Year award. He's a National 4-H Foundation Distinguished Alumni and an honorary member of Alpha Zeta, and board member of Christian Farmers Outreach.

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