'Siege Mentality'

January 26, 2016 08:16 AM

‘Siege Mentality’

There was not a lot of good news coming out of USDA milk production  and dairy cold storage reports released last week, say Bob Cropp and Mark Stephenson, University of Wisconsin dairy economist.  The two record a monthly pod cast that provide analysis that can be viewed here

“There was almost nothing optimistic in these reports,” says Stephenson. U.S. milk production was up just 0.7%, but that came in the face of weak dairy exports. So stocks continue to build, with butter stocks up a whopping 46% and cheese up 13%.

Even though some 30,000 cows may have died in Texas and New Mexico earlier in the month due to the blizzard, it’s not a large number in the broader context. “Thirty thousand cows is only about 10% of the number of cows culled in a month in the U.S.,” says Stephenson.

If there is any good news, U.S. and world cheese prices are starting to converge, which will make cheese exports perhaps more likely. Currently, U.S. cheese prices are running about $1.46/lb. while world prices are at about $1.36. U.S. butter prices are still well above world prices, with U.S. prices running at $2.16/lb while world prices are $1.58.

Feed, fuel and fertilizer prices will also be moderate in 2016, which will help out budgets on the cost side, says Cropp. But milk prices will be a challenge, with Class III prices not expected to break $14/cwt in the first quarter. Prices aren’t expected to rebound to $16 until the fourth quarter.


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