Analysts seem to be contradicting themselves over what will happen to the milk market this year.
One day they predict a turnaround before year’s end, and the next day, they warn dairy farmers that they'll be scraping by and struggling to keep the bank happy.
Unfortunately, the recovery may be a long way off, according to USDA’s Livestock, Dairy, & Poultry Outlook for February 2016. It predicts Class III milk prices won’t break $14.50/CWT in 2016.
The report analyzes economic impacts of events based on projections from USDA's World Agricultural Supply and Use Estimates Report for beef, pork, lamb, poultry, eggs, and dairy production and trade. The February outlook estimates there will be nearly 9.3 million milk cows in the barn this year, producing an average of 22,795 lbs of milk each. Those figures project milk production to total nearly 212 billion lbs. in 2016.
The report forecasts the average all milk price for the year to be $15.30/CWT with a highest level during the 4th quarter with a $15.80/CWT price. USDA predicts Class III prices will reach their peak in the third quarter at $14.50/CWT. Class IV prices as forecasted are also pretty gloomy, hovering around the $13 level and even dipping down to $12.75/CWT in the second quarter of 2016.
If you don’t have a risk management plan in place, you should figure one out today. Here’s a great place to start: What to Do When the Futures Markets Offer Little Hope.
How are you dealing with low milk prices? Share your tips and strategies in the comments.