Margins pressured more as milk prices retreat
It’s the season that most people look forward to all year: school is out for summer, and temperatures are rising quickly. Spring planting has finished as farmers now hope for good weather and timely rains throughout the growing season. Families are hopefully helping themselves to plenty of ice cream in celebration of June Dairy Month.
However, many dairy farmers are likely not fully celebrating the season. Glancing at the CME milk price futures curve or a recent milk check has become a stressful experience. Significant milk price reductions and, subsequently, margin contraction have materialized in recent weeks, driven especially by a weaker Class III complex.
CME futures market expectations show a Class III milk price between $16 to $17 per hundredweight (cwt.) in near-term months, with the Class IV milk price in the $18 to $19 range into the summer months. If realized, these prices are not profitable and are below the estimated cost of production for farmers in every region of the U.S.
June 5, 2023