The University of Wisconsin’s Bob Cropp, speaking on his monthly podcast, expects Class III prices to climb above $16 in the fourth quarter of 2016, and average $15.30 to $15.40 for the year.
That’s almost a buck better than USDA’s most recent forecast, which pegs the 2016 Class III average at $14.05 to $14.85. Some private analysts are predicting the 2016 Class III to average closer to $14.
The reason for Cropp’s cautious optimism: “I think we’re going to have slower milk production [this year] than USDA thinks…. But a lot can happen between now and the end of the year.”
One concern is domestic consumption. Cropp and Mark Stephenson, also an economist with the University of Wisconsin, say the drop in U.S. dairy exports this year is about as severe as during the Great Recession. In 2008 and 2009, dairy exports dropped from 13% of U.S. milk solids to 8%. This past year, exports dropped from 16% to 14% on a bigger volume base.
The difference has been solid U.S. domestic demand, especially for cheese. “What worries you a little bit is if this year’s economic recovery is as good and as consistent as last year,” says Stephenson. “If we get a little concerned about the current economy, there is a bigger problem.”
You can view the entire 11-minute podcast here.