2024 has been filled with volatile milk prices, forcing dairy farmers to try to capture the highs and weather the lows. $15 Class III milk prices during the first few months of the year, to futures briefly reaching $24 in September, the swing in milk prices has been drastic this year, begging the question, “are the highs already in?”
“I think the highs are in,” said Robin Schmahl, dairy analyst with AgDairy, a division of John Stewart & Associates and AgMarket.net. “Unfortunately, we have the buyers of butter who feel comfortable. They feel comfortable with supplies.”
Supply Trends in Butter and Cheese: Understanding Buyers’ Caution
Schmahl points out August butter and cheese supplies give a hint into why buyers feel are content with supplies. The USDA dairy products report, which was released in early October, showed butter supplies hit 159 million pounds, which was 14.5 percent above August 2023, but 3.0 percent below July 2024. Total cheese output reached 1.20 billion pounds, 1.7 percent above August 2023 and 0.5 percent above July 2024.
“The traders or the buyers are comfortable, and that’s why you’ve seen how they’ve stepped back from that market because they just don’t have to be aggressive,” he added.
Optimistic Yet Measured Forecasts for Prices
Schmahl, along with Katie Burges, Director of Risk Management for Ever.Ag, and Dan Basse, president and founder of AgResource Company, were part of a live U.S. Farm Report marketing discussion during World Dairy Expo this year. That was just two weeks after Class III milk futures hit new record highs.
“Luckily, we fell from a very high price level,” said Burgess. “But I think the market could be to a point of stabilization. Yes, people are comfortable with supplies, but it’s not like we have surplus supplies to push it lower. I think we’ve seen the worst of the fall in the cheese market.”
Basse says AgResource remains relatively bullish on the milk markets, especially when you look at competitors around the globe.
“I agree with Robin, I do think the highs are in, but I also don’t see a big break below $19. But as we transition into next year, there’s no expansion into Oceania. As long as the consumer stays engaged, I am relatively bullish dairy and milk as we go into the middle of next year. If you remember last year we talked about species. It was the year of species this year. And so, I still believe that carries through into 2025,” he shares.
The ‘year of species’ was made even more profound by the phenomena with demand for beef-on-dairy. It’s caused a shortage of heifers in the U.S., which could be another bullish factor to fuel the milk market in 2025.
“We’re seeing that tight heifer supply. That’s not going to change anytime soon,” says Schmahl. “So having that, we’re keeping some of the older cows into the herds. But it is going to be an issue that we won’t be seeing the expansions and maybe quite the improvement in genetics as we move forward.”
Demand, Demand, Demand
Basse pointed out consumer demand will play a key role in the market in the months ahead, but according to Burgess, you can’t overlook the importance of exports.
“This year, cheese exports in March, April, May, we set new record highs,” said Burgess. “So, to me, I don’t know that in 2025, we’re going to be able to best the records that we set this year. That being said, over the summer, exports have come down a little, but they’re still at good levels. And we look at the EU, as Dan alluded to. We’re not seeing much growth there. And because of that, I think the U.S. is still competitive. We’re hearing about some exports getting booked for 2025. I think it’ll be good. I just don’t know if they’ll be new records next year.”
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