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Cropp: Dairy Picture Looking a Little Brighter
USAgNet - 06/29/2016

Even though the first half of 2016 has been rough for a lot of dairy producers, the months ahead do show a few glimmers of hope. That's according to Professor Emeritus Bob Cropp from the University of Wisconsin-Extension, who says improvements in the dairy markets, stronger butter sales and the weather may all work together to provide better news in regards to milk prices. In his latest Dairy Situation and Outlook report, Cropp said dairy product exports and dry whey have picked up a bit in June, which could push the Class III milk price back to the $13.25 range.

"Sales of butter and cheese have been good particularly in food service, but exports have been weak," Cropp said. "So the question is will these dairy product prices hold or even increase more? If so, milk prices will be considerably higher for the remainder of 2016 than what has been forecasted."

He points out that USDA's June forecast still had the Class III price averaging for the year $13.40 to $13.80 and the Class IV price averaging $13.15 to $13.65. Both Class III and Class IV futures have responded to higher dairy product prices, he noted.

"Whether these dairy product prices hold or improve even more and increasing dairy producer prices will depend a lot upon the level of milk production," he adds.

In recent months, many states have been experiencing record milk output--and doing it with less cows.

And then there's the weather factor. The long-time professor says La Nino conditions in the forecast increases the probability of hot and humid summer for much of the country. That could lead to lower milk per cow, and thus less milk being brought into the market. Cropp says there are also signs that global milk production may start to slow, as well.

"Low milk prices appears to be affecting milk product in New Zealand and Australia and starting to do so in the EU. As world milk production slows world dairy product prices will improve."

And if China starts buying more dairy products, U.S. dairy exports could slowly improve during the second half of the year.

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