It seems as if the dairy industry has taken HPAI in stride. Price fluctuations have been the result of buyers of the physical commodity on the CME daily spot market doing normal business.
So far, HPAI has not had an impact on milk futures or the underlying cash prices. However, HPAI has not had an impact on milk futures or the underlying cash prices.
Cow numbers declined last year and will likely decline further if milk prices remain low. Tightening heifer numbers and higher milk replacement cow prices may reduce the ability of farms to keep stalls full.
The large decline in cow numbers and reduced milk production turned traders bullish, but that was short-lived. Will higher milk prices be delayed once again?
Heifers are not as abundant as they had been with prices increasing significantly. Dairy cattle slaughter has slowed with farms showing more interest in purchasing cows to keep stalls full while fewer go to slaughter.
The hope is that depressed milk prices will be short lived. However, without a significant increase in demand or tighter milk supply or both, low prices may be with us for a longer duration.
Just how low will milk prices go? Slower exports, weaker demand and global inflation have all been an anchor on the potential for higher dairy product prices. Will we finally start to see some relief in 2024?
With sufficient supply and much of the holiday buying being finished, there is little reason for buyers to be aggressive. The usual slower demand period is just around the corner.
Dairy farmers have recently turned their focus to the higher cheese and butter prices seen in the market. At the same time, dry whey prices have also silently moved higher, supporting Class III milk prices.
The markets are always filled with surprises and this year has been no exception. Butter prices have reached new highs while dry whey and nonfat dry milk markets have remained flat.
Higher milk prices may not necessarily mean greater income depending on feed prices. The recent hot weather has had an impact on milk production, but it also may have had an impact on crop yields.
The seasonal decrease of milk production, higher culling, and inventory of cheese not exceeding the levels of last year, may increase buyer interest on the spot market as they look ahead to later demand.
Dairy product and milk prices are substantially lower than a year ago, yet this has not been reflected at the retail level. Thus, lower prices are not stimulating demand as consumers are not seeing them.
Dairy products continue to be offered on the spot market even though prices are already low. Sellers seem to want to move product and limit inventory rather than maintain a higher supply for upcoming demand.
Spot milk prices continue to remain lower than usual since the end of last year. Many plants are not purchasing the available milk even though plant capacity is not fully utilized.
The recent movement of barrel cheese is similar to some previous moves over the past two years. Each time price peaked and fell faster than it increased. Will this pattern again be repeated?
Buyers of dairy products on the spot market have not been aggressive in 2023. They see plentiful supplies and no indication of that changing anytime soon. Here's what that could spell in terms of milk prices.
Even though there are reasons why it seems milk futures should not be declining as much as they have, traders are anticipating milk prices based on the current domestic and international fundamentals.
One never knows when milk prices have reached their peak. Many tend to wait until underlying cash shows weakness before taking a serous look at the market. However, many times some opportunity has already been lost.
Wide price swings have become more frequent over the past year. These price swings have taken place over short durations as market participants have been quick to enter and exit positions.
With the uncertainty over milk prices and input prices, it becomes necessary to establish price floors for milk and price ceilings for feed. Not doing anything is making the decision to leave your whole farm at risk.
It certainly has not seemed like there's been a seasonality to cheese prices this year, but price movement shows otherwise. However, milk futures have not reflected that due to an overall bearishness in the market.
Many farmers have not developed a marketing plan to protect milk prices. This leaves the farm open to risk and the possibility of significant financial loss which could put the farming operation in jeopardy.
Cheese and butter prices continue to hold a large price difference with butter around $1.00 higher than cheese. One reason for this is the substantial difference in inventory levels between cheese and butter.
Food prices have risen substantially causing consumers to look for ways to stretch their dollar. Dairy products will remain an integral part of the diet, but the volume of purchases might be reduced.
Markets can be driven by trader psychology for a period of time and can result in prices being overdone to one side or the other. In the end, fundamentals rule. Recent reports may indicate the market may see a change.
Milk production has been below the previous. This fueled the expectation for higher milk prices leading to record prices. However, cheese inventories continue to grow despite the slowing of milk production
There is uncertainty surrounding the impact a recession could have on milk prices. Dairy demand may perform better than other areas, but slowing demand might pressure milk prices.
With some major dairy exporting countries experiencing declines of milk supply, the U.S. is positioned to fill the void of supplying high quality dairy products for increasing world demand.
