Dairy situation and outlook
By Bob Cropp, Professor Emeritus
University of Wisconsin Cooperative Extension
University of Wisconsin-Madison
Cheese prices on the Chicago Mercantile Exchange have rebounded after a low of $1.00 per pound in April to a high of $3.00 per pound on July 13. Prices have fallen since then to $2.23 at the end of July.
These price changes resulted in the Class III milk price to increase from $12.14 in May to $21.04 in June and $24.54 in July.
Unfortunately, milk prices are headed lower with the August Class III around $19.45 and possibly heading to the $16’s for the reminder of the year. Unless prices strengthen some Class III, milk could fall below $16. Current Class III September futures are $15.41.
Home consumption of dairy products has and con-tinues to run well above year ago levels. Restaurants partially reopened and there was a need to buy cheese and replenish their stocks. But in July the surge in the coronavirus resulted in restaurants being instructed to cut back on their openings. It also looks like food service will be negatively impacted as many schools and colleges open this fall with virtual learning, high school and college fall sports being cancelled, professional sports to have no fans in the stands and conferences and other major events being cancelled.
These moves hurt beverage milk, cheese and butter sales. Under the Farmers to Families Food Box program that operated from May 15 to June 30, the government purchased a lot of cheese. The second round of Farmers to Families Food Box program is operating from July 1 to Aug. 31, but the amount of cheese purchased will be reduced.
Demand was also in-creased by higher dairy exports in May and June. May dairy product exports were the most in two years with record exports of nonfat dry milk/skim milk powder, improved exports of cheese and whey products. June exports were up 28% by volume from a year ago. Cheese exports were a record for any given month, nonfat dry milk/skim milk powder exports were up 77%, butterfat exports 15% higher and total whey products 8% higher with dry whey 41% higher as China purchases more whey products as they restock their swine herd following last year’s African Swine Fever outbreak. But July exports may have been lower, particularly for cheese as June and July prices were well above world prices.
There remains a lot of uncertainty as to where milk prices are headed for the remainder of the year and for next year. Until the coronavirus comes much more under control and things return more to normal the demand for dairy products will be depressed. Dairy exports could continue to do fairly well as U.S. prices have now become more competitive with world prices. Also, world milk production in other major exporters continues to increase at a relatively slow rate which could give U.S. opportunities for more exports. But with the worldwide spread of the coronavirus there is a concern that a worldwide recession could dampen demand.
Milk prices could strengthen some with milk production seasonally lower in August and September. Also, as in the past the demand for cheese and butter is expected to increase during the holiday season.
