While farm-level milk prices inched higher for January, bigger gains may be in the cards for later this year.
The price for Class III milk, or milk used in cheese production, is $13.96 per hundredweight for January, according to the U.S. Department of Agriculture’s class and component price announcement made Jan. 30.
While that’s an 18-cent improvement from December 2018, it’s 4 cents lower than January 2018. The Class IV price was $15.48 per hundredweight for January, up 39 cents from the previous month.
In their January “Dairy Situation and Outlook” podcast, UW-Madison dairy economists Bob Cropp and Mark Stephenson said they’re forecasting “gradual improvement” in milk prices through this year, with the markets potentially brightening more substantially by the fourth quarter.
“The persistence of this downturn is really starting to take a toll,” Stephenson said, with more farmers exiting the dairy business and becoming discouraged by the industry’s prospects. “Balance sheets are taking a hit, making bankers nervous.”
“It’s dragging on longer than I like to see,” Cropp added.
Cropp said the dairy industry has endured four tough years, with 2018 being the worst of them. 2019 is looking better, he said, but it may not be a lot better, at least until later in the year. He looks for Class III prices to reach $16 by the second half of 2019.
Spot markets for cheese and whey were hit hard earlier last month, Stephenson said, but he looks for a “gentle improvement” in farm-gate milk prices throughout this year, with “more aggressive” positive price movement by the fourth quarter as the dairy industry works through large world stocks of dairy products such as powder.
Stephenson said diminishing stocks, combined with slower growth in U.S. milk production, should contribute toward a price rally by later this year. Also good news for farmers, he said, is the new Dairy Margin Coverage program in the farm bill. He encourages farms of all sizes to consider enrolling.
“There’s not a lot to be really optimistic about, but we do see steady improvement,” he said.
Spot dairy markets posted an “up day” Jan. 25 as some buyers returned to the market, according to that same day’s Stewart-Peterson commodity report. Cheese barrels came off of multi-year lows, while the block market moved slightly higher. Class III and IV milk futures reacted positively.
“It’s encouraging to see that some inventory on the buy side started coming to the market down at these depressed levels,” according to the report. “The key will be if buyers will continue to push the market higher.”