By Bob Cropp
The Class III price may not reach $14.00 until April or May and average in the $14’s for the first half of the year. Milk prices will strengthen for the second half of the year. Opinions now differ considerably by how much. A lot depends upon the level of milk production. While milk prices are considerably lower, lower feed costs still result in returns over feed cost to encourage milk production.
In USDA’s latest supply and demand report they forecast milk cows to average slightly lower than 2015, but milk per cow to average 1.9% higher netting 1.7% more milk than 2015….USDA forecasts the Class III price for the year will average in the range of $14.05 to $14.75 compared to the $15.80 average in 2015. Current Class III futures don’t reach $14 until May and stay in the $15’s for the remainder of the year. I think there is a good chance milk prices could do better than this.
I think the increase in milk per cow could be less than 1.9% resulting in less than a 1.7% increase in total milk production. I also think exports during the second half of the year will improve especially for nonfat dry milk/skim milk powder and whey proteins. But, U.S. will face rather stiff competition for markets from both New Zealand the EU. As of now I forecast Class III prices in the $15’s by third quarter and in the 16’s for the fourth quarter and averaging for the year in the low $15’s.