Last week milk markets tested recent lows and then bounced back. What’s causing this price action? Dan Vaught, Pro Farmer’s senior market analyst says a variety of global factors are pressuring prices but the markets could have a positive rebound in the coming months.
“Milk prices were clearly declining through the second half of 2018, which I largely attribute to burgeoning New Zealand production, which was projected to post a 6% annual gain in 2018,” Vaught says. “That worsened a glut of dairy products, particularly of the various milk powders, on the international market, which in turn depressed U.S. dairy exports (and tended to boost imports).”
While U.S. producers had trimmed their herds by over 40,000 (from last January) by November, total production was still inching upward, he says.
Recent price action, as the chart shows, followed a seemingly stabilized market after analysts thought it posted a bottom in early December.
“Last week’s drop clearly carried prices to fresh lows,” he says. “However, the fact that the market bounced strongly after testing the $14.00 level suggests the potential for a significant reversal.”
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