Farmers get early Christmas gift as milk price climbs

posted Dec. 3, 2016 6:25 p.m. (CDT)
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by / Heidi Clausen, Regional Editor |

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Dairy farmers received an early and, undoubtedly, welcome Christmas present with the U.S. Department of Agriculture’s Nov. 30 announcement of the Class III milk price for November.

The new Class III price is $16.76 per hundredweight, up almost $2 from October and $1.46 higher than November 2015. This is the second highest price for 2016, coming in behind $16.91 in August, and brings the average for the year so far to $14.64.

Wisconsin farmers were paid an average of $17 per hundredweight for their milk in October, according to the latest USDA National Agricultural Statistics Service “Agricultural Prices” report. This was down 90 cents from the previous month as well as last October. The U.S. milk price for October was $16.60, down 40 cents from Wisconsin and 70 cents lower than September. All 23 major milk-producing states saw a price decrease from September.

After the holiday season cheese orders are filled, cheese prices likely will weaken, resulting in a Class III price in the low-$16s for December, according to Bob Cropp, dairy professor emeritus at UW-Madison. He said the Class III price will average near $14.75 for this year, compared to $15.80 last year and $22.24 in 2014.

Cropp expects the Class III price to kick off 2017 in the upper-$15s and continue rising through the year until possibly reaching the $17s by the fourth quarter. Next year’s average could be about $16.50, he said. That’s up a bit from USDA’s expected Class III average between $15.30 and $16.20.

“But final milk prices will be subject to any rather small changes in milk production, sales or exports,” he said.

Milk production continues to run well above year-ago levels, with October output up 2.5 percent. Milk cow numbers have dropped 6,000 head since peaking in August, so more milk per cow is behind rising milk production. Milk per cow was up 2.3 percent from a year before. October production was up 2.2 percent in Wisconsin and 1.9 percent in Minnesota, compared to a year earlier. Milk production for the year will end up about 2 percent higher than in 2015, and milk per cow will be up about 1.7 percent. USDA is forecasting 2017 milk production to increase another 2.1 percent.

“That is a lot of milk,” Cropp said. “But we can expect high milk prices from continued good butter and cheese sales as well as improved exports as we move through next year. The growth in world milk production has slowed as major exporters — the (European Union), New Zealand, Australia and Argentina — all are experiencing lower milk production with either a decline or relatively small increases for 2017. The U.S. is the only major exporter experiencing higher milk production.”

Led by countries such as China, world demand has picked up, he said. “This tightening of world supply and demand will reduce the buildup of world surplus, increasing world dairy product prices and making U.S. dairy products more competitive on the world market. World prices are already showing strength.”

Four straight months of improving milk prices and three consecutive months of falling feed costs have brought some much-needed financial relief to U.S. dairy farmers following the tough economic conditions of early last summer, according to the November “Dairy Market Report” issued Nov. 30 by the National Milk Producers Federation and Dairy Management Inc. The monthly Margin Protection Program formula rose from $5.75 per hundredweight in June to $9.48 in September.

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