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Cropp: Forecasts Show Better Milk Prices in 2017
Wisconsin Ag Connection - 01/27/2017

Though there is still a lot of milk on the market right now, one ag economist says the mood of the American consumer and the dairy production trends of certain countries overseas could spell opportunity for the U.S. dairy industry in 2017. Professor Emeritus Dr. Bob Cropp from the University of Wisconsin-Extension says improved milk prices are on the horizon this year, after the Class III base price went from the $13 range during the first half of '16 to over $17 in December.

"The January Class III price will fall from the December high, but the January Class IV price will be higher," Cropp said in his monthly Dairy Situation and Outlook Report this week. "The January Class III price could be about $16.50 and the Class IV price near $16.00. But, unless cheese prices rebound the Class III could fall below $16 for February."

Nonetheless, Cropp notes that Class III prices should stay in the $16 range through late-spring and then move into the $17s for the remainder of the year.

"Any changes in expected milk production, sales or exports could result in quite different prices," he said. "Dairy producers may want to use some price risk management tools to take advantage of relatively high Class III and Class IV futures. Currently Class III futures are averaging $17.52 for the year and Class IV futures $17.19."

Cropp stated that the USDA is projecting the average number of milk cows to increase slightly, with milk per cow also expected go up. With that relatively strong production increase, milk price increases will depend upon continue good butter and cheese sales and continued growth in dairy exports.

"Continued growth in the economy and improved consumer confidence spells well for good sales," he noted. "Also, milk production for four of the major exporters--EU, New Zealand, Australia and Argentina--are expected to be lower than a year ago and not expected to show increases any time before the second half of the year. U.S. is the only major exporter experiencing higher milk production."

Meanwhile, world demand is also improving with more activity from China, Southeast Asia and others. The monthly summary said world supply and demand is slowly tightening and world dairy product prices are increasing; thus creating favorable conditions for growth in U.S. dairy exports.

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