Will higher milk prices persist? Explore Class III futures, market trends, and USDA forecasts to understand the factors driving milk prices and what to expect next.
Will we continue to see higher milk prices? Class III futures have made an impressive increase over the past month, with the June contract rising by over $4.00 per cwt. The last time we saw this type of movement in an actively traded contract was in the spring of 2020, following the impact of COVID-19 and the implementation of the Farm to Families Food program. This year, the surge seems to be driven by lower milk production levels and the perception that milk supply will tighten as the year progresses.
Currently, milk production is lower than last year due to reduced cow numbers. This trend is not expected to change significantly due to a tight heifer supply, making it somewhat challenging for farmers to keep their barns full.
Interest in Beef-on-Dairy
Currently, the interest in beef-on-dairy remains strong as a profit center. Eventually, beef prices will decline, and the strong premiums realized for those calves will drop substantially. This may be somewhat similar to organic milk’s strong premiums over conventional milk. The premiums decreased significantly once more farms moved that way. As that happens in the future, there will be a large push to breed more cows to obtain more heifers, as that will be the profit center. The markets will always move in cycles.
USDA’s Estimates
Despite lower cow numbers and the perception of a lower milk supply as the year progresses, the USDA increased its estimate of milk production for this year by one billion pounds in the May World Agricultural Supply and Demand report. The current estimate is for milk production to reach 227.3 billion pounds. They raised the production potential due to the better outlook for milk prices. They released their initial milk production for 2025 on the report with an estimated 229.3 billion pounds for the year.
This year’s Class III milk price estimate was raised to $16.75. The Class IV price was reduced by $0.15 to an average price of $20.25. The All-milk price for this year was raised to $21.20.
It’s still early in the year, and milk prices may change substantially and hopefully for the better. USDA was not as optimistic next year with an initial estimate for Class III at $16.30, Class IV at $19.95, and the All-milk price at $20.90. This does not give us much to look forward to.
- Milk prices have been rising but are expected to face volatility throughout the year.
- USDA’s future estimates for milk prices are less optimistic, with lower predictions for next year.
- Current market dynamics, including tight heifer supply and strong interest in beef-on-dairy, influence milk prices.
- The price spread between Class III and Class IV milk futures has seen significant changes, which might continue evolving.
- Export demand is anticipated to improve, potentially bolstering milk prices later in the year.
