Heading into 2017, there was a lot of discussion about market recovery and improved milk prices. While prices have improved, milk production increases could cap how high prices will go. Brian Doherty of Stewart Peterson told AgDay host Clinton Griffiths cheap feed, a growing herd and world market situations making the U.S. market look attractive have all lead to increased production. Farmers aren’t making money hand over fist, but most are stable at current prices.
“As we’ve talked to producers some are making money and some say they aren’t losing money but kind of status quo,” he said.
Producers haven’t let mediocre prices keep them from making more milk.
“The unfortunate part about that is farmers produce more to try and produce their way out of poor prices,” he said. “The net result will be likely increased production in 2017 probably 2-2.5%.”
Unfortunately, that could mean a cap in prices or even a potential price slide, according to Doherty.
“If demand can’t absorb that, we’re going to be in a place where prices go from roughly upper $16, $17 and even $18 to all of the sudden peeling off 10% or so and dropping $1-1.50,” he said.
“Chicken or egg which one comes first?” Doherty asked, “Demand or higher supply?”
He said the market is stuck in neutral with both increased supply and demand.
“We’re at prices that really don’t work but farmers aren’t losing their shirt,” he said.
According to Doherty, the picture could change depending on what happens to feed costs if weather isn’t perfect this growing season.
“Overall, we think demand is stable but it’s not necessarily on an upswing right now,” he said.