Do Dairy Producers Have Reason to Be Optimistic?
May 27, 2022
The milk market over the last several years certainly challenged dairy farmers to remain optimistic. Robin Schmahl with AgDay, says that the current positivity in the dairy industry is welcome and stems from the latest milk production report that illustrated a 1% decline in production.
The big contributor to helping support milk price is coming mainly off cheese and butter, Schmahl says.
However, his concern is with dry whey, and says that while it has dropped in price, he doesn’t think it has bottomed out just yet.
“I don’t think dry whey has reached its bottom yet,” Schmahl says. “But I think that’s the thing that’s dragging the market to some degree. That’s limiting its potential.”
Schmahl recently told AgriTalk host, Chip Flory, that if dry whey had not declined, that would equate to more dollars in the pockets of dairy producers.
“Because every penny more in dry whey equates to .06/cwt. more in Class III,” he says.
“Dairy exports are doing well,” Schmahl adds. “Cheese and butter have been phenomenal over the last year.”
Schmahl says that the March USDA Milk Production report illustrates a growth of 59% in dairy exports.
“Despite the logistic problems and exporting, dairy has been able to overcome that and move out of the shores,” he says.
On the other side, powders have shown some struggle, like with dry whey.
“Dry whey was down 18% in March,” Schmahl notes. “We have seen that happen the last few months. And again, I believe most of that is because of the world market. Our prices got a little bit too high and backed off.”
How good is $25.75/cwt in today’s market?
“It's difficult to know where that stacks up initially to cost of production,” Schmahl notes. “Cost of production has increased quite a bit.”
Although Schmahl shares that dairy producers are pleased with milk prices, he admits that producers do not like the skyrocketing costs of feed, fuel and everything else, but they are still making a profit.
“They’re hoping that milk prices stay where they are now, so they can maybe get ahead a little bit,” he says.
With higher milk prices, producers can sleep better. Schmahl says that producers should take advantage of milk prices instead of watching and wondering if prices will go higher or lower.
“The best thing to do is provide or establish some floors on the way up,” he says.
Schmahl strongly recommends Dairy Revenue Protection (DRP) for producers to cover the basics right now.