Dairy prices reach highest levels in five years

Prices get boost from good domestic demand, improved cheese exports and final liquidation of EU's skim milk powder stocks.

Krissa Welshans, Livestock Editor

December 6, 2019

2 Min Read
Dairy prices reach highest levels in five years

The recent upsurge in dairy prices is forcefully showing up in data, with many of the most recently announced and reported key milk and dairy prices achieving their highest levels in nearly five years, according to the December “Dairy Market Report” from Dairy Management Inc. (DMI) and the National Milk Producer Federation (NMPF).

The report relayed that the September U.S. average all-milk price, at $19.30/cwt., was the highest since December 2014, as was the October Agricultural Marketing Service (AMS) survey price of nonfat dry milk and the advance-announced federal order Class I mover for December. The AMS survey price of cheddar cheese and the federal order Class III price were also both the highest announced since November 2014.

“Continued reduction in the number of U.S. milking cows — a trend that will likely taper off in a few months — and moderate increases in the average production of milk and milk solids per cow have been important supply-side contributors to higher prices,” the report noted.

Prices were further boosted by good domestic demand growth and improved cheese exports as well as the final liquidation of the massive, government-acquired stocks of skim milk powder the European Union built up in 2015 and 2016, the report said.

“These developments more than offset a drop in exports, some recent softening of U.S. butter prices and deteriorating dry whey prices, owing to China’s swine fever epidemic and the ongoing U.S. trade war with that country,” the DMI/NMPF report added.

Looking ahead, the report said the milk price forecast based on the mid-November CME dairy futures closely agreed with the U.S. Department of Agriculture’s November updated forecast for average milk prices during 2019.

“With just three remaining months to be reported, both were pointing to $18.60/cwt. for the calendar year, $2.30/cwt higher than during 2018.Their two forecasts for 2020 diverged significantly. USDA projected $18.85/cwt. for 2020, while the futures were pointing to an average of $19.65/cwt. for the calendar year,” the report explained.

At the same time, the report said USDA’s DMC Decision Tool was indicating less than a 25% probability that the Dairy Margin Coverage margin would fall below the maximum coverage level of $9.50/cwt. before the end of 2020, with the lowest point coming in the middle of next year.

About the Author(s)

Krissa Welshans

Livestock Editor

Krissa Welshans grew up on a crop farm and cow-calf operation in Marlette, Michigan. Welshans earned a bachelor’s degree in animal science from Michigan State University and master’s degree in public policy from New England College. She and her husband Brock run a show cattle operation in Henrietta, Texas, where they reside with their son, Wynn.

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