Last week was tough on the milk market. Not only did the Global Dairy Trade auction come in lower for the second consecutive time, but USDA’s milk production report and cold storage report both indicated oversupply. Robin Schmahl, hedge and marketing specialist with AgDairy, says farmers can expect milk prices to be choppy in the near term and then grind lower throughout the quarter.
Listen to this week's Dairy Market Wrap:
USDA’s milk production report indicated overall production was up 0.7% in December compared to December 2014. It also showed 1,000 more milk cows in production compared to the previous month and more than 23,000 cows in production now than the same period one year ago.
The cold storage report showed butter demand is slowing. “We’ve seen good movement of butter,” Schmahl explains. “We’ve seen inventory decline, but in December we saw butter inventories increase 15% from November.”
Butter stocks were 46% higher than December 2014, according to USDA. There is butter moving into inventory, so that could be a lot more bearish when the next cold report is released, Schmahl says.
All cheese inventories included in the report were also higher year-over-year.
Other notable market movements for the week were:
- Blocks down 2.5 cents.
- Barrels down 9.5 cents.
- Butter down 8 cents.
- NFDM down 4 cents.
“It’s not warm and fuzzy as far as milk price is concerned,” Schmahl says. “Milk prices will be choppy in the near term, but slowly grinding lower.”