News

Will dairy volatility dry up after the election?

An ag economist says the dairy market has experienced more volatility than any other commodity in 2020.

Kyle Schrad with StoneX says Class III milk prices hit near all-time lows at the start of the coronavirus pandemic and rallied to record high levels a few short months later with the onset of the food box program buying.

“We’re seeing just massive amounts of volatility not only on the whole within dairy but also within some of these price spreads which has made things really, really difficult to project.”

He says traders are no longer able to rely on historical price trends as government buying continues and suspects the volatility to remain at least through the end of the year, but depending on the election…

“I think in all likelihood we would see that program dissipate if not altogether disappear depending on the outcome of the election.”

Schrad says that, increasing feed prices, and declining GDP in countries that have driven a growth in dairy exports could have a substantial impact on milk prices in the year ahead.

He’s calling for cheese and butter prices to decline while whey and nonfat dry milk are expected higher with U.S. milk production forecast to increase by 1.5 percent in 2021.

Schrad spoke on a recent StoneX webinar on the volatility in commodity markets.