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Will a supply slowdown turn markets around?

At the midpoint of 2023, milk prices are significantly worse than many, including me, expected coming into the year. Without a major demand surge expected from either the domestic or export markets, a slowdown in milk production might need to be the turning point for any price improvement in the second half of the year. But reducing supply at a national herd level doesn’t happen overnight, and the impact on prices can underwhelm.

The last time we saw a major swing in price levels from record highs to painful lows (setting aside the wild volatility of 2020) was from 2014 into 2015. The Class III price fell from $24.60 per hundredweight (cwt.) in September 2014 to $15.46 per cwt. by February 2015. At the time, cow numbers continued to climb slightly even after prices had collapsed, peaking in May 2015 at 9.33 million head before very gradually falling by about 28,000 head by January 2016 — not enough to shake markets out of what became a prolonged rut.

Ben Laine

July 3, 2023

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