Just in time for summer, dairy producers are slowly starting to reap the
benefits of good domestic sales and stronger exports. That's the assessment of
Dr. Bob Cropp with the University of Wisconsin-Extension. In his monthly Dairy
Situation and Outlook report, the professor emeritus said May is already experiencing
increases in dairy product prices after exports set a record high in March on a
total volume basis surpassing the previous record set in early 2014.
"If these dairy product prices can hold, average May prices compared to
April on the CME could average about 4 cents per pound higher for butter, about
14 cents for cheddar barrels, four cents for 40-pound cheddar blocks, eight
cents for nonfat dry milk, and three cents dry whey," Cropp noted.
"As a result the May Class III price would be near $15.25 compared to
$14.47 in April the low of $13.40 back in February. The May Class IV price
would be near $14.45 compared to $13.48 in April and the low of $12.87 back in
February."
His summary further stated that the price of butter, cheese, nonfat dry milk
and dry whey remain lower than and competitive with world market prices. But
milk prices are expected to strengthen and possibly top out in October or
November.
"The degree of strength will continue to depend upon the level of milk
production and dairy exports," he said. "The summer weather, quality
of forages harvested and the condition of the corn and soybean crop that will
impact feed costs will have a bearing on milk production this summer, fall and
into winter."
Meanwhile, the USDA's recent April milk production report also shed some
positive news for milk prices. Compared to April 2017, milk production was just
0.6-percent higher and milk cow numbers declined by 2,000 head from the month
earlier. Cropp has been saying for months that milk production will need to
slow down if prices are going to catch its footing again.
All told, the retired professor says the Class III milk price could reach near
$16 by June and reach even higher in July and beyond. Cropp further expects
dairy margins to improve, but that depends on what feed prices do over the
remainder of the year.