Spring flush is again here for most of us. The West seems to have reached its peak with the rest of the country seeing steadily increasing production. Invariably I get calls about the impact of spring flush due to most farms being conventional rather than pasture based. The fact is that it has more to due with weather rather than cows getting out on pasture. However, we cannot discount the impact of those who have the ability to pasture dairy cattle in light of a greater movement by smaller and even some larger farms to adopt a pasture based system. After all, there is an increasing market for milk from pastured dairy cattle as well and including organic milk.
We also understand that milk production is increasing due to improvement in genetics and better and more efficient feeding and housing. I have been on many well-managed small dairy operations as well as well-managed large dairy operations and there is a place for all and all are important. Dairy demand is increasing world-wide and farmers are increasing milk output to meet that demand. This brings us back to the earlier discussion about spring flush. Cows feel better when it turns to spring just like most all of us do. We feel better and more productive and the same can be said for cows.
The difference we are experiencing again so far this year is that the usual increase in milk during spring is not depressing milk prices. Seasonally, we would see milk prices weaken during spring into early summer, but milk prices have been holding and slowly increasing from the low set in February. It is almost like it was in 2013 when the low for the year was set in March before increasing about $1.50 by May with prices maintaining a price range of about $1.00 through the rest of the year.
Current fundamentals would suggest a similar pattern as milk production remains above last year and if exports continue to lag. If inventory builds to a comfortable level with buyers obtaining ownership for expected demand as well as a cushion, we may see fairly stable prices. This would mean milk futures during the second half of the year may either already be a good reflection of prices or could fluctuate with lower prices experienced at times. It certainly does not appear prices will decline as much as feared earlier in the year when Class III milk futures dipped down to various levels below $14.00.
Support for cheese price stems from continued good demand. Inventory of American cheese declined in March. The last time March stocks were lower than February was in 2011 and before that all the way back to 2004. However, even though stocks tend to build this time of a year, a decline of American cheese stocks in March is not a rarity. Since 1980, March inventory has declined 14 times. Each of those year showed a quick rebound of stocks in the following few months. The key will be what cheese stocks will due in April. That will provide a good indication of what can be expected during the second half of 2015.
-Annual Livestock Slaughter on April 27
-Federal Order class prices on April 29
-Dairy Products Annual report on April 29
-April California Class 4a & 4b prices on May 1
-March Dairy Products report on May 5
Robin Schmahl is a commodity broker and owner of AgDairy LLC, a full-service commodity brokerage firm located in Elkhart Lake, Wisconsin. He can be reached at 877-256-3253 or through their website at www.agdairy.com.
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