A window has opened for dairy farmers to consider locking in some positive margins based on futures contracts, according to a recent market report from CoBank. Overall, 2024 should go in the books as a top-three milk price year. On the flip side, grain prices have been dropping steadily this summer to reach a five-year low – admittedly not good for crop farmers but an opportunity for livestock producers. In July, the margin above feed costs to produce milk moved to the best level since May 2022 at $12.33 per cwt. Forecasts for the remainder of the year show margins improving to nearly $16 per cwt., based on calculations from the Dairy Margin Coverage (DMC) program.
The positive movement in milk prices has been driven largely due to tighter supplies rather than stronger dairy demand. Milk supplies have gotten tight among the big three dairy product exporters – New Zealand, the EU, and the US Stateside milk production is on pace to be down for two straight years. If the trend plays out, this would be the first time in over 50 years that milk production has declined for back-to-back years.
That being noted, milk component production (butterfat and protein) continues to grow. While Highly Pathogenic Avian Influenza (HPAI) has caused concern in the US, cases have occurred in less than 1% of the US dairy herds. A more concerning health issue is taking place in Europe as bluetongue outbreaks have put downward pressure on milk with Germany, the Netherlands, and Belgium particularly hard hit.
23 October 2024
By: Global Ag Media
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