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Economist’s milk outlook sours after USDA’s production & cold storage reports

University of Wisconsin Center for Dairy Profitability Director Mark Stephenson says the two USDA reports released Monday turned his 2021 dairy price outlook around.  “I had slightly improved milk prices (projected) for 2021 and after Monday’s report, I would say I would have to switch that around and say that I think milk prices may be down, maybe as much as thirty cents a hundredweight, and I do expect volatility.”

Stephenson says the nationwide rise in milk production is why. “It’s been more than a 2% increase nationally since September so we’re producing a lot of milk. When you get above that one-and-a-half to two percent level, it means that we aren’t going to consume that product. We really have to think about exporting it.”

Stephenson says the increased production has raised the amounts of cheddar cheese and butter in cold storage, and he’s concerned that another USDA food box program won’t solve the problem. “The food need in this country is real. We’ve had programs that have tried to deal with that short-term demand out there, but we aren’t going to be able to eat our way out of this much milk.”

Stephenson says with milk production and dairy stocks this high, producers might be forced to slow production again. “I would say we’ve got so much milk on the marketplace and questions about, you know, where we’re going to be competitive and how we’re going to become competitive, we may actually see some of our cooperatives again pulling the trigger on base-excess plans as a means of trying to equitably slow milk production down. We’ve got a lot coming on, and I’m not sure that we can handle it all domestically.”

Stephenson was a presenter Tuesday (1/26/01) at the University of Wisconsin’s virtual Ag Outlook Forum.

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