September 1, 2020
Negative Producer Price Differentials (PPDs) have been an issue for dairy farmers the past few months. But the good news is economists expect them to be less negative moving forward.
But there's a little bad news behind the reason why. Class III prices are falling from well above the $20 cwt. price.
Wisconsin Dairy Economist Mark Stephenson says August should be the last month of the larger negative PPD's. The current futures markets are trading at $16. Still, there could be some strength in the Class III market this fall. But experts say milk production must slow and the markets must see some normalcy.
Schools Back in Session
Many schools are reopening, and it's hoped that will help with the demand for dairy. About 6% of U.S. milk solids are consumed annually by students ranging in age from kindergarten through college. Students' biggest consumption comes in fluid milk which is about 14%.
But according to recent estimates about 60% fewer meals will be served by schools this fall. That's based on reports that more than half of classes will be in the form of distance learning and only about 25% will be taught in person. One analyst with F-C Stone says some of that lost consumption will be made up by meals at home.
Dairy to Become Carbon Neutral
Dairy Farmers of America is setting a goal to reduce greenhouse gas emissions by 30% by 2030. Also, the group has aligned itself with the work of the Innovation Center for U.S. Dairy with a goal to become carbon neutral or better by 2050.
Key strategies to make this all happen include mitigating methane emissions from cows using renewable energy methods utilizing anaerobic digesters and capturing emissions through healthy soil and crops.
A leader with the cooperative saying that while the dairy industry only contributes about 2% of total U.S. greenhouse gas emissions, they know it's imperative to keep doing better and making improvements.