Class III futures have made an impressive increase over the past month with the June contract increasing by over $4.00 per cwt. The last time we saw this type of movement in an actively traded contract was in the spring of 2020 after the impact of COVID-19 and the implementation of the Farm to Families Food program. This year it seems to be due to the lower level of milk production and the perception that milk supply will tighten as the year progresses. The current level of milk production is lower than last year due to reduced cow numbers. That is not expected to change much as the heifer supply is tight leaving it somewhat difficult for farmers to keep barns full.
The interest in beef-on-dairy remains strong as a profit center at present. Eventually, beef prices will decline, and the strong premiums realized for those calves will drop substantially. This may be somewhat similar to organic milk's strong premiums over conventional milk. The premiums decreased significantly once more farms moved that way. As that happens in the future, there will be a large push to breed more cows to obtain more heifers as that will be the profit center. The markets will always move in cycles.
By ROBIN SCHMAHL
May 13, 2024
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