University of Wisconsin dairy economists say tight global supply and demand situation should support Class III prices at $19.
Despite declining cheese and butter prices and growing stocks of the two dairy commodities, dairy economists Bob Cropp and Mark Stephenson remain optimistic that milk prices will remain strong through August.
Speaking in their May 2013 Dairy Situation and Outlook podcast
, the two University of Wisconsin-Madison economists say a tight global supply and demand situation should support Class III prices at $19 or higher per cwt. through the summer.
Even as milk prices have remained high, U.S. dairy exports have strengthened, fueled by growing global demand and weather-related problems in key milk-producing regions of the world. Earlier this year, drought in New Zealand – a key global dairy exporter – raised concerns about the area’s milk output. Recent rains have helped alleviate the drought there, boosting the outlook for a return to better milk production. But Europe has been having milk production problems, Stephenson says, and Ireland, another major dairy producer, has been inundated by recent rains.
Both Cropp and Stephenson expect strong global demand and relatively flat milk production in the U.S. so far this year to bolster milk prices through the summer. Cropp believes $20 Class III prices are "still a possibility" and doesn’t expect to see prices dip below the $18 level until the first quarter of 2014.
Watch their discussion here