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Economist offers an outlook on milk prices, exports

An economist says dairy prices have been mostly steady with increased cheese production thanks to consumer demand, but that might change. 

Tanner Ehmke with CoBank tells Brownfield cheese production is up and the ability to make more cheese is coming online soon. “It doesn’t stop. We’re going to see more capacity added. Next spring, there are more plans for capacity to be added. Throughout 2023, 24, and 25 going forward, that is clearly a theme that remains intact.”

Ehmke says, for now, the consumer is there to take cheese, butter, and other dairy products both domestically and on the export market, but once new processing plants go online, it will take a while for production and consumption to balance out. “So, we’re going to be oversupplied with cheese for a while when these new plants come on, and that’s going to weigh on Class III prices.”

Ehmke tells Brownfield the butter market will likely have an impact on both Class 3 and Class 4 milk prices. “You want to watch what’s happening with that spread between Class III and Class IV. Class IV prices will probably maintain a very healthy premium over Class III because of the tightness in butter supplies, and so that’s going to add more value to the milk check as we’re going to see Class IV with a bigger contribution there.”

And because of these conditions, Ehmke says producers should plan for compressed margins and move some 2023 purchases to this year if possible.