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Wisconsin Ag News Headlines |
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2024 Dairy Markets Waiting on Demand
Wisconsin Ag Connection - 04/17/2024
The All Milk price and Class III milk prices have shown a modest start in the early months of 2024. Prices have not reached the lows of 2023; the most noteworthy development has been the robustness of Class IV prices, bolstered by strong butter prices.
The low prices of 2023 and the current stagnant prices in 2024 can be cured by either an increase in market demand or a decrease in milk supply. A significant factor in our current pricing challenges has been the lack of demand. The markets’ response has been to reduce cow numbers. Despite the reduction in cow numbers, the market has not yet demonstrated a sustained positive price response. One contributing factor is the continued strong production of milk components. The production of U.S. milk solids is setting new records, indicating a diminishing correlation between cow numbers and total milk solids produced. This trend towards increased production efficiency appears to be long-term and shows no signs of slowing.
It is reasonable to assume that demand-side price pressures continue to affect the market. With an estimated investment of over $7 billion in dairy processing projected between now and 2026, it is difficult to maintain a bullish outlook. An increase in cheese processing could limit the upward price potential for Class III. Similarly, enhanced U.S. butter production, together with potential increases in global milk supply, could mitigate the future positive impacts on Class IV prices. Currently, the most feasible prospect for a near-term increase in milk prices would be through a surge in demand, especially from exports.
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