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Cropp: Small Improvements Seen in Dairy Prices
Wisconsin Ag Connection - 03/22/2018

Dairy farmers will see a small hike in their milk checks for March compared to the month earlier, but any further gains in 2018 will depend on the age-old rules of supply and demand. Dr. Bob Cropp from the University of Wisconsin-Extension says higher cheese prices will increase the Class III price to around $14.30 compared to $13.40 in February. Butter prices are also expected to rise as the Class IV price for March will be around $13.25.

In his monthly Dairy Situation and Outlook report, the professor emeritus said that while stocks of dairy products remain relatively high, improved domestic sales and dairy exports helped to strengthen prices.

"Milk prices for the rest of the year will of courses continue to depend upon domestic sales, dairy exports and the level of milk production," Cropp said. "With continued improvement in the economy domestic sales should be positive for milk prices. Dairy exports will continue to face stiff competition for markets mainly from the EU as their milk production continues to show strong growth. As far as other major exporters milk production is up just slightly in Australia but lower in New Zealand and Argentina."

As stated in past months, Cropp stressed that a key factor to where milk prices will be headed going forward will depend on the level of milk production.

"Despite low milk prices milk production is not slowing down. Compared to a year ago, milk production was up 1.8-percent for both January and February. Milk cow numbers have increased each month since last October for a total increase of 15,000 head," he said.

Meanwhile, U.S. dairy products remain price competitive on the world market. The prices of butter, cheese, nonfat dry milk/skim milk powder and dry whey are all lower than EU or Oceania prices. And with the world economy improving, the U.S. should see some growth in dairy exports during 2018.

Cropp says that unless milk production slows down or dairy exports show greater increases, it appears that milk prices will continue to slowly improve.

He predicts that Class III could improve to the $15s by July and possible top out near $16 by October, but the average for the year will not be higher than $15.00 compared to $16.17 last year.

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