Dairy futures prices have struggled to find much ground to stand on. Short term gains from heat waves or a spike in exports have done little to help the American dairy farmer. It is difficult to lock in profits or even manage risk with market inverses or flat futures prices as we look out into 2027. Locking in a profit is difficult, if not impossible today.
Outside factors such as declining beef cattle futures have caused a lot of concern, as for many, the extra income produced from calves sold has been the factor that allowed many producers to stay afloat. Here recently, feeder cattle prices have fallen nearly 30 cents per pound in the last three weeks and over 50 cents per pound in the last 60 days. While the beef cattle herd is not growing, the government is trying to help consumers at the grocery store by increasing imports.
Opening the border between the United States and Mexico, although slowly taking place one port at a time, it is still bringing cattle to the country. On top of that, President Trump announced a plan to ease tariff duties on ground beef getting imported into our country over the next 90 days with an impossibly high limit of 300,000 metric tons of beef possible to enter our country. While many argue that amount of imports is not feasible in such a short time, the impact is still concerning as the intention is to sell this beef at a discount of 25% lower than market value.
While the thought is noble to the American consumer, lower the grocery store bill and bring in extra meat for needy families, the practice has many arguing over if this will long term hurt the beef cattle industry. We have already seen some of the effects only one week in, with many news articles recirculating about recalled foreign beef. Questioning the product itself, which in turn hurts the farmer.
For the dairy producer, trying to weigh if this downturn in cattle prices is temporary with still 75-year lows in cattle herd size, if they should hold calves back for higher prices or hang on to culls a little longer. The problem is, while beef cattle prices have fallen apart, in the meantime feed prices have skyrocketed. Corn has rallied over a dollar per bushel in the last 60 days and soybean meal over $40/ton making the decision to feed an animal a little longer a bit more difficult and substantially more expensive.
As if flat dairy prices, lower cattle prices and higher feed cost aren’t enough, the cost of fuel has become a major expense in a short amount of time. Diesel prices have rallied nearly 30% in the last two months causing an immediate shock to the bottom line as well has limited liquidity of farms already short on cash from holding back from selling calves.
The immediate turmoil commodity markets have caused for dairy farmers is difficult to measure. As milk prices find difficulty gaining much ground in the high production environment, we are currently in, other factors beyond the dairy producer’s control have taken a hit on the bottom line. While feed costs and rising fuel costs do not appear to be going away anytime soon, the fundamentals of low cattle numbers still outweigh the short-term addition to increased ground beef supplies.
What higher feed costs do suggest is higher rates of culling cows that are not producing at the volumes needed to pay for their keep. Potentially lowering the long-term milk supply if higher grain prices are here to stay. Which in a high demand market like the dairy market finds itself in today, could be the spark the market needs to help futures get out of this oversupply slump.
Sarah Jungman is a commodity broker with AgMarket.Net and AgDairy, the dairy division of John Stewart & Associates Inc. (JSA). JSA is a full-service commodity brokerage firm based out of St. Joseph, MO. Sarah’s office is located in Winterset, Iowa and she may be reached at 515-272-5799 or through the website www.agmarket.net.
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