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Economist: Record Heat, Drought-Damaged Crops to Fuel $20 Milk Prices

July 24, 2012
By: Catherine Merlo, Dairy Today Western and Online Editor
Close up corn ear in field
  
 
 

Dairy economist Bob Cropp says “everything has changed drastically” since he predicted $18 milk prices last month.

Fueled by record heat, drought and skyrocketing feed costs, milk prices could soon climb to $20 per cwt., says University of Wisconsin professor emeritus Bob Cropp.

“Everything has changed drastically” since he predicted $18 milk prices last month, says Cropp in discussing the July 2012 dairy outlook in a podcast with colleague Mark Stephenson.

Record temperatures and drought across much of the Midwest Corn Belt have directly affected cows and crops, making feed “a real concern” for livestock producers, Cropp says in the 11-minute podcast. Corn, soybean and hay crops are all likely to be short this year.

The heat is taking a toll on dairy herds, reducing milk per cow, Cropp says. Add in $8 corn, and dairy producers will further reduce cow numbers. “That will affect milk production into next year,” Cropp says.

Livestock producers aren’t the only ones suffering from the skyrocketing market. Earlier this year, Cropp says, some forecasters predicted a bumper corn crop and thought corn at $4.50 per bu. was possible. Some corn growers contracted their crop at $5 to $5.50. “Now they don’t have the corn to fill it,” says Cropp.

Dairy exports, which have maintained a strong pace this year, could slow because of higher milk prices and less product to ship, he adds.

The gap of some $2.50 per cwt. that now exists between Class III and Class IV prices will narrow, Cropp predicts. “We’re going to see a jump in powder prices,” he says.

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