No Milk Market Rebound in the Near Future
Milk Prices 061423
It’s a tough time right now for the U.S. dairy industry. Some dairy producers and haulers have had to dump milk due to market being flooded with it. On top of that, milk prices have fallen substantially from some of the record prices dairy producers saw in 2022.
After hitting a record high in Class III fluid milk at nearly $26 per cwt. last year, milk prices have plunged to new contract lows last week at $15.07 per cwt.
“Last year was close to almost $10 difference on the milk price,” says Greg Moes of MoDak Dairy in Goodwin South Dakota. “Right now, we [the dairy industry] are over producing for the processing side and for the use side.”
Exports have also slowed off their record pace. So, with the current low milk prices and high feed cost, that puts many dairy operations below the cost of production.
“If you are going to use $15.50 as your mailbox price, you’re losing $5 per cwt., and it may be even more depending on silage and if you were buying it last fall when corn prices were higher,” says Marv Post, President of the South Dakota Dairy Producers Association.
As a result, dairy margin coverage and dairy revenue insurance payments kicked in at the start of the year.
“Every little bit helps, but it’s more for [producers who have] less cows,” says Nicolien Hammink of Himmink Dairy in Bruce South Dakota. “We [participate in] Dairy Revenue Protection and that is better for us than the Dairy Margin Coverage.”
Last year was a very profitable year for dairy producers, so there hasn’t been much cow liquidation yet. But if milk prices remain low, some may be forced to conduct heavier culling. The hope is that will slowly help the milk market rebound.
For more on milk prices, read:
- How Long Will Butter Remain Rangebound?
- 2023 All-Milk Price Drops Below $20
- Expect Lower Milk Prices to Stick Around