Robin Schmahl

Robin Schmahl is a commodity broker and owner of AgDairy LLC, a full-service commodity brokerage firm located in Elkhart Lake, Wisconsin. He can be reached at 877-256-3253 or through their Web site at www.agdairy.com.

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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.
Increased cost of production has somewhat been compensated for by increased milk prices. But do milk prices need to remain high just because?
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.
Milk futures have been impacted significantly by dry whey and nonfat dry milk, making rebounds to previous highs more difficult to achieve.
Lower hay supplies and to potential for lower acres and lower production this year could increase hay prices significantly.
Dairy markets have seen their share of substantial price swings, but more so since the beginning of the year as milk futures moved to record highs. The recent weakness of dry whey may be cause for concern.
With current milk prices where they are and the optimism prevalent in the market, there have been comparisons made to 2014 when we experienced the highest milk prices on record with the All-milk price averaging $23.98.
Comparisons are being made to 2014, but there are many differences that will impact both milk prices and farm profitability.
The past few months have shown incredible volatility for both cash and futures. Buyers were intent on making sure they had sufficient supply on hand in the event milk supplies and dairy product supplies would tighten.
The market is trying to find the balance between perception and reality. Exports have been exceptional, and the potential is for increased exports to Canada due to the USMCA panel determination. Prices will be volatile.
There is concern over the potential for a tighter supply of dairy products. This is increasing the interest of buyers to purchase more aggressively earlier than usual.
USDA recently announced the signup period for the Dairy Margin Coverage program for 2020, a very important program for the protection of income over feed prices.
Some the historical cycles and seasonal price movements are not being followed as they have in the past. The bottom line is supply and demand.
The continued strength of milk futures shifted the mindset of traders to bullish as dry product prices provide support to the market.
New milk pricing ideas have been put forth, but there is an immediate call to revert back to the higher of pricing formula.