You already know milk, cheese and butter prices have been “souring” in recent months. Despite the expensive U.S. dollar and rising exports, the outlook for milk prices for 2017 is still somewhat better than 2016, although not as attractive as even a few weeks ago, summed up Jim Dunn, ag economist at Penn State University.
Class III and class IV prices for most of 2017 are expected to be higher than in 2016. Dunn’s estimated average for the Pennsylvania all-milk price for 2017 also is $1.63 higher than the 2016 average.
Feed prices will remain relatively low this year, added Dunn in his April outlook column. That should help keep 2017 dairy profitability better than in 2016.
Feed grain impact on income over costs
Corn and soybean meal prices are lower than last month, with corn down 6%, meal down 6% and soybean prices down 6.5%. They’re likely to remain relatively low since South American corn and soybean crops will be very good, and world inventories are very high. Lingering drought in parts of New England and southeast Pennsylvania may have only a small impact on local prices.
Penn State’s measure of income over feed costs fell by 0.5% in February. But it remained about the same as the last two months, with all three months well above 2016. Income over feed cost reflects daily gross milk income less feed costs for an average cow producing 65 pounds of milk per day.
Production still rising
U.S. milk production, according to USDA’s latest report, shows milk production continues to rise. It is hurting prices since the dollar is high and the domestic market won’t absorb the extra milk. Unfortunately, the other dairy exporters are increasing milk production as well.
Finding markets for all this milk will be a challenge. Even so, milk prices are poised for modest improvement in the years ahead. For Dunn’s complete analysis, click on April Dairy Outlook.
Source: Penn State University