Dairy Market Roller Coaster Will Continue

The dairy markets in the first quarter of 2016 can be summed up in one word: volatile. Last week was no different, although dairy hedge specialist Robin Schmahl of AgDairy says there were several market surprises last week.

“There was more volatility than we expected, but in the end, the market wasn’t far from the week before,” he says.

According to Schmahl, cash prices put in a good run, ending higher in most categories, including block cheese which closed the week $0.04 higher than the week before. That’s the highest block cheese price since Dec. 3, and Schmahl says it should have a positive effect going into this week.

Butter was also up last week. The increase of $0.0625 might sound surprising, given growing butter inventories, but Schmahl says the boost reflects the typical growth in butter demand as the Easter and Passover holidays approach.

Listen to the Weekly Dairy Market Wrap below:

The Federal Order class price report also came out last week. Class II is at $14.40, Class III at $13.80, and Class IV made an encouraging increase to $13.49.

Then the January all-milk price was announced. At $16.10, that is the lowest all-milk price the industry has seen since July 2010, and the market felt the negativity of that number. 

Schmall expects the futures markets will continue to make contract lows all the the way out to January 2017.  “The market is pretty bearish,” he says. “Next week, we will see more volatility. We will just keep chopping around.”