December 30, 2019
Dairy farmers are enjoying the holidays just a little more this year thanks to better milk prices. The November Class III price of $20.45 per cwt. is the highest it’s been in five years. For the year, Class III prices will average almost $17, that’s $2.35 higher than last year and $4 higher than the $13.89 low set last February. Part of that price strength is less pressure from production. USDA’s November milk report showed production was up less than 1% and cow numbers were down 27,000 head from a year ago.
“To a degree, let’s keep in mind that the fourth quarter is a massive consumption period for dairy,” says Mike North, a dairy economist for Vault Ag. “And so, the ‘holiday bid’ as we refer to it, is there for a reason. When that goes away, it’s not that demand goes away, it’s just that it’s not as robust as it is in the fourth quarter. So, it will back off and that is when we generally see inventories start to rebuild. That normal cycle I believe will stay intact.
News of China potentially buying more product from us is also very supportive, we just don’t know what that is going to look like yet. On the cow side of things, we’ve already began to rebuild the herd. We’re not exactly sure at what speed, but we’re already 10,000 cows back up off of the low point for the herd by the most recent estimation. So, that could continue given that profitability is in play right now for the dairy sector.”
University of Wisconsin dairy economists Bob Cropp and Mark Stephenson say 2020 should be another good year. Cropp is projecting Class III prices to average $17 and $18 for all of 2020, that’s about $1 than 2019. Stephenson is even more optimistic, particularly for the second half of 2020.