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Cropp: These Are Good Times in the Dairy Industry
Wisconsin Ag Connection - 02/25/2014

The recent slowdown in milk production coupled with record dairy exports is making the milk check look pretty good these days. So says Dr. Bob Cropp, professor emeritus with the University of Wisconsin Cooperative Extension. In his monthly Dairy Situation and Outlook report, he noted that February is seeing record cheese and milk prices this month, with 40-pound cheddar blocks setting an all-time high price of $2.36 per pound and cheddar barrels at $2.32.

"The February Class III price will be near $23.15, up $2 from the January price of $21.15 which is a record for the month," Cropp said. "Both the Class III and Class IV prices are more than $5 higher than February a year ago. And the January U.S. All Milk price was $23.20 and will be about $25 for February, also a record and more than $5 above a year ago."

With feed prices a lot lower than a year ago, Cropp says dairy producers are experiencing strong margins. This will help them recover financially after receiving very depressed milk prices in 2009 followed by tight margins during the recent drought years.

The report stated that butter and cheese production has been off in recent months and that stocks of both products are tight. But he adds that dairy exports are forecasted to decline from last year's record as milk production is increasing in each of the five major dairy export destinations.

"But, after rather poor milk production in each of these exporters last year and strong world demand there are not surplus dairy stocks in any of the countries," he said. "It will take some time to rebuild stocks and world demand is expected to continue a strong level. So U.S. dairy exports ought to remain at high levels through the first half of the year and end the year down only slightly from last year's record."

Cropp went on to say that despite high slaughter cow prices dairy farmers may reduce culling of cows. The January 1 cattle inventory also shows the total number of dairy replacements about unchanged from a year ago with the number to calve this year up by just 1.8-percent.

"However, Lower quality forages appear to be reducing milk per cow in some states like Minnesota and Wisconsin," he said.

Meanwhile, the severe drought in California will likely add to the value of alfalfa hay prices later this year and that could impact the level of milk production recovery in the state. But nonetheless, milk prices will average higher for the first half and could result in another record setting year for dairy producers.

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