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SE WI | First of all, does it explain why milk prices are $15 instead of $10? Maybe not. It also doesn't explain why prices are $15 instead of $20. From a processor's point of view, it's the margin that matters. From anybody's point of view, it's margin that matters. What's the difference between income and expense? From a dairy farmer's point of view, what's the difference between the milk price and expenses (mostly feed or feed-related expenses)? I think it was a Dickens character who said, "Annual income 20 dollars, annual expense 19 dollars and 50 cents. Result: happiness. Annual income 20 dollars, annual expense 20 dollars and 50 cents. Result: misery." (Of course he used pounds and shillings instead of dollars and cents).
But if you're looking for a reason for milk prices being where they are? You could ask 5 different people and get 6 different answers. My opinions? Exports are supporting the market. (I believe that exports are the most over-looked yet one of the most important drivers of US dairy prices.) Dairy exports are up like around 9% over last year. The dollar is trending weaker lately, making exports more attractive to foreign buyers. This is an argument for why milk prices aren't $10.
Feed costs are reasonable. If you need proof of that head over to the Market page to see how the crop farmers are feeling. Replacement costs are very low. Sexed semen has dramatically increased the heifer supply. Herds that want to expand can source good-priced replacements. Herds that don't want to increase number can still "upgrade" their herd by buying cheap replacements and culling out the low-performing animals, taking advantage of the relatively good meat market prices. Either way = more milk production. ETA: Your observation about domestic dairy inventories is pretty spot-on. This is an argument for why milk prices aren't $20.
Speculation in the dairy markets are pretty low. It's not a very liquid market (no pun intended). There is some fund activity and it looks like the funds are net long, but it's pretty small potatoes compared to the other commodity markets.
I think everyone is paying attention to dairy because of the Canada-US spat, Trump talking about it every day for the past week, the news articles and Facebook posts about processors "dumping" farmers. It makes the news. But at the end of the day, it does mainly boil down to supply and demand and costs and revenues for every player in the marketplace.
Edited by mmbdgr 4/26/2017 22:25
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Milk cwt price question.
