Fundamentals Suggest a $13 Milk Price in Your Future
It’s no secret that dairy producers across the country are feeling the pinch of a tight margin this year with prices 30% lower than 2014. While some analysts are suggesting a price turn around in 2016, Mike North says fundamentals suggest the price will get worse before it gets better.
North told “AgDay” host Clinton Griffiths these three factors are playing into an out of balance supply and demand situation:
- Ban on product from Russia
- Fewer exports to China
- Huge production levels.
Watch the full AgriBusiness segment from “AgDay” below:
Milk production has increased incrementally throughout the world. With the lift on quota in the EU, European farmers are producing an excess of milk which ultimately affects our ability to export.
“As we’ve walked our way throughout the year,” North explains. “We’ve filled all the little cracks and now we’re just looking for a buyer to pick up the next slack. They’re not there.”
He says more milk is going into products and increasing dairy product stocks. At the same time, the prices of those products is decreasing but still isn’t competitive in the world market. North thinks that will change and the result will be lower milk prices on the farm.
“These factors indicate milk prices that are around $13,” he says. “In a market that is at $14, that’s hard to say to a group of dairymen. That’s exactly what the product inventory, the world buyers and the exchange rate hurdles and all of these other fundamentals suggest to our market. We are moving towards parity and that’s going to be a little painful for U.S. producers.”
