Milk production for January through July was 1.6% higher than a year ago. With milk production flat the last quarter of last year, we can expect milk production to continue to run 4% or more higher than year-ago levels for the remainder of the year, ending 2014 around 2.4% higher than 2013.
We can expect dairy product prices and milk prices to decline. The question is how soon, and by how much. It will take time to build stock levels, so prices could gradually decline rather than take a sharp fall.
Dairy futures remain very optimistic, with the Class III price staying above $21/cwt. through October; above $19/cwt. for December; and above $18/cwt. for all of 2015.
The Class IV price stays above $20/cwt. through October, but then declines more quickly, to less than $18/cwt. by December; staying in the $17s/cwt. for 2015.
But, the odds are that prices could average lower – rather than higher – than these future prices later this year and into 2015. Nevertheless, milk prices will set new records in 2014, with the Class III price averaging well over $21/cwt. compared to $17.99/cwt. last year, and the Class IV price over $22/cwt., compared to $19.05/cwt. last year.
University of Wisconsin-Madison