There is a glimmer of hope on the horizon for dairy farmers. Economists expect the prices farmers receive for their milk to rise $1 to $1.50 per hundredweight (100 pounds) in 2020.
“We’re seeing a stronger 2020 overall,” said Leon Berthiaume of Dairy Farmers of America.
If predictions hold, it will be the highest prices farmers have received since 2014.
Farmers have already begun to see some improvements.
The blend price in Boston — farmers are paid differently for their milk depending on how it is to be used, the blend price is a weighted average of those prices — is roughly $19.40 this month, $3 higher than it was at the start of the year, according to data from Agri-Mark.
With some seasonal ups and downs, that price is expected to stabilize.
The above chart shows milk prices for Classes III and IV and the All Milk price for 2018 and 2019. Source: U.S. Dairy Export Council
Farmers have struggled with low prices since 2014’s record high prices came crashing down because of an oversupply of milk. While domestic supply is still growing, the rate of growth has slowed to under 1 percent, according to Berthiaume.
“Milk production has been curtailed somewhat globally, so that’s been beneficial as well,” he added.
But the biggest benefit may come from a reduction in the amount of cheese, butter and milk powder sitting in warehouses.
The European Union had a large supply of milk powder which it has worked through, and Berthiaume said there has been some improvement in powder prices just since July. Class IV milk, which is milk used to make powder and butter, has gone from $15.50 per hundredweight to $16.74, according to Berthiaume.
Butter stocks have also fallen from 296 million pounds in May to 222 million pounds in December, the U.S. Dairy Export Council reports.
Cheese stockpiles haven’t declined as much as powder and butter supplies, but demand has exceeded supply and is slowly reducing the amounts sitting in warehouses, a trend the holidays should accelerate.
“Our cheese market has been really strong in the last couple of months,” said Berthiaume.
Exports have also been stronger, although whey has been impacted by both the tariffs China imposed on dairy in response to the Trump administration’s tariffs and a swine flu which has hit the pig population in China. The Chinese had been purchasing large quantities of whey to feed their pigs.
“On the national level, the House just passed the USMCA,” said Berthiaume. The trade agreement between the U.S., Canada and Mexico is expected to bolster exports and bring an end to tariff battles the administration initiated with Canada and Mexico. The Mexican tariffs, in particular, hit the dairy industry hard.
The U.S. is also entering into negotiations for a new trade agreement with Japan.
But while there is good news on the price front, Vermont’s dairy farmers also had a challenging year with what is often their biggest nemesis — the weather.
“We had a very, very wet spring, challenging to get seed in the ground,” said Berthiaume.
That wet spring may also have impacted the quality of feed. New England farmers who have started using forages and feeds are reporting a lower quality, according to Berthiaume. Lower quality can mean lower milk production.
In some areas, the weather meant “there isn’t the availability of feed,” said Berthiaume.
Grain prices are up, and that impacts farmers’ margins.
But overall, dairy farmers can look forward to 2020.
Source: samessenger.com
