The cause of dairy price volatility has changed

Economist Ben Laine with Terrain tells Brownfield the volatility of milk prices is likely not going to change, but what drives those market ups and downs has changed. “Supply is really not the driver. It’s not are we making too much milk or are we not making enough milk, we’re making pretty much the same amount of milk year-after-year, partly because of base programs, partly because of heifer inventories and things like that. What’s really driving things is consumers.”

Laine says domestically, consumer demand for dairy has been good, but the international markets have been shaky lately. “It’s definitely not as good as it was in 2022. We had export markets to thank for a lot of the price strength that we saw last year.”

Laine says the U.S. was competitive on the world market then, but when the European Union started producing more milk, The U.S. was priced out of that market.  Laine expects U.S. dairy exports will increase again. “Cheese prices right now are coming down quite a bit, and that’s not a great thing, but the silver lining is potentially we do get competitive on the global markets again, and that does lead to more opportunities.”

Laine spoke to Brownfield during World Dairy Expo.

Terrain provides ag market insight and forecasting for customers of American AgCredit, Farm Credit Services of America, and Frontier Farm Credit.

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