High U.S. Cheese Prices Could Pressure Milk Prices In 2020

03:01PM Nov 22, 2019
Greg Hooker Dairy
“Right now, it's on firm footing,” Brian Rice of Vault Ag told U.S. Farm Report host Tyne Morgan. “It can last through the end of the year, I don't see any big breaks, but as we get into the January part of the calendar [that could change].”

( Anna-Lisa Laca )

Despite USDA reporting that October milk production rose 1.7%, milk prices continue to remain higher. Can $20 milk stick around?

“Right now, it's on firm footing,” Brian Rice of Vault Ag told U.S. Farm Report host Tyne Morgan. “It can last through the end of the year, I don't see any big breaks, but as we get into the January part of the calendar [that could change].”

U.S. cheese prices are much higher than the rest of the world, and Rice fears pricing resets and forward contracting resets in January will lead to trouble exporting U.S. cheese. 

“High prices can cure high prices too, and cheese north of $2 when Europe is in the $1.60’s,” he said. “We can't compete for the international markets at that level. So, if we start losing those exports, it'll back up and then that'll fix the high prices.”

With that in mind, Rice encourages producers to look for the highest contracts out there and secure that portion of the milk check. 

“If I'm looking into 2020 second half of the year, Class IV is where we would look at the moment. Second half Class IV is at $18. It's 50 cents over the first half and it's 50 cents over Class III in that area,” he explained. “So that would be the portion of the milk check [to start with]. I would start with DRP floors on an $18 second half Class IV at $17.20. That's above the historical average, so you got to start picking your points there.” 

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