The milk markets have faced extreme headwinds this year. As milk prices remain low, it’s also causing producers to scale back on production. Simple economics says if milk supply is down, milk prices should be higher. But according to Phil Plourd, president of Ever.Ag insights, the dairy markets are in uncharted waters at this point.
“I think that for the first time in the years that we've been looking at dairy markets, we've never really seen a situation where supply was not great and probably headed lower. But demand has been equally or not up to the task either,” Plourd says. “And so in a vacuum, if you said, ‘Hey, U.S. milk production is down to half a percent, Europe is barely breakeven and New Zealand's not doing well, what's the milk price?’ I'd say, ‘Well, it's going be $20 or something like that.’”
The reality is Class III milk futures are hovering around $16 cwt today. Plourd says even though milk supply is down, export demand is also down, which is keeping milk prices low.
By TYNE MORGAN
December 1, 2023
dairyherd.com
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