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Cropp Looks Ahead to 2015 Milk Price Trends
Wisconsin Ag Connection - 01/27/2015

After going through a year where the average U.S. all milk price was nearly $24.00 per hundredweight, the January Class III price is expected to be around $16.00 and will likely decline further by spring. University of Wisconsin-Extension expert Bob Cropp says prices could average about $7 lower for the year compared to 2014. He said in his latest Dairy Situation and Outlook report that there will soon be payments under the new Margin Protection Program for Dairy for those producers who signed up with margin protection above the $6/cwt. level.

"At this time the probability that margins could actually be below $6 is quite low. But, it is early in the year and milk prices are very sensitive to rather small changes in milk production, domestic sales and dairy exports," Cropp said. "So, this year could turn out quite different than what I just described--particularly for the second half of the year. There is a lot of uncertainty when projecting milk prices six months to a year out."

So what is causing milk prices to decline? He says it's a combination of higher milk production and lower dairy exports.

"Domestic sales, with the exception of fluid milk, have been good and are expected to be good in 2015. But, milk production, after increasing just 1.3 percent over a year ago January through June of last year, increased 3.5 percent July through December, finishing the year with an increase of 2.4 percent," he noted. "The increase was the result of an average of 0.4 percent more cows and 2.0 percent more milk per cow."

Dairy exports declined significantly during the second half of the year. The latest export data is for November showed that exports as a percent of U.S. milk production declined to 14 percent that month.

Cropp says he expects milk production to keep running strong at least for the first half of the year. But, with lower milk prices and lower margins, the relative increase in milk production will slow as producers increase cow slaughter and not feed as aggressively for more milk per cow.

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