News

Prepare for a bearish end for 2020 milk prices

A dairy analyst says the run-up in dairy prices has been a long time coming but it’s not expected to last through the end of the year.

“We’ve seen Class III milk above $20 and we haven’t seen these levels in about six years.”

Highground dairy director of global operations Alyssa Badger tells Brownfield when cheesemakers started to lose foodservice demand at the beginning of April, they locked in as much product as possible in exports. And she says, “Completely separate, manufacturers and co-ops told farmers and incentivized them to make less milk as we approached May.”

As demand has resurfaced at the foodservice level, cheesemakers have been short on product and supply at the same time the food box program is asking to fill contracts.  Badger says dairy farmers also aren’t expected to increase production until at least the fall which should keep prices supported.

In April, U.S. cheese prices were the cheapest on the global market, but Badger says with the aggressive rally, it will be difficult for the U.S. to compete in the months ahead. “We do believe the second half of the year global demand will be much weaker than what we saw in the first half because inventories have been building up in those regions and restaurant and foodservice demand will still probably be down 20 percent.”

Badger’s strongly recommending dairy farmers lock in prices in the Dairy Revenue Protection Program as far out as possible based on component pricing rather than the drama in futures.  She is expecting a bearish end to 2020 with demand remaining limited at foodservice.