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Prepare for Lower Milk Prices Next Year
By Anna-Lisa Laca
As 2017 comes to a close producers around the country are looking to 2018 milk prices. Will prices improve in the New Year? A massive national herd, burgeoning supplies, declining domestic demand and a strong dollar should indicate prices might dip lower before they improve.
Supply outpacing demand
“We’re at an incredible crossroads in the dairy industry. Today we have as many cows as we did in 1996, shortly after I got into this business,” says Mike North of Commodity Risk Management Group. “There is a growing supply of products pretty much across the board.”
According to North we are heading into a time of year when consumption generally declines, but processors continue making product adding to the already growing stocks of dairy products.
“We’re making product and adding to inventory, and so there’s this massive collision of increased supply,” he explains.
According to Scott Brown from the University of Missouri, it’s not just the supply situation in the U.S. that is causing the problem, but milk supplies around the globe continue to increase.
“We have a lot of stocks overhanging markets globally,” he explains. “It’s hard to find that demand side that is going to pull us now domestically.”
Increasing domestic consumption
Demand for fluid milk continues to decline despite new innovations like Fairlife’s ultra-filtered milk. Still, domestic demand should be part of the strategy to eat away at supply. Michael Dykes of the International Dairy Foods Association says he and Jim Mulhern of the National Milk Producers Federation are working to find creative ways to increase consumption in America.
“One of the things we’re looking at is can we do something with the current SNAP program to incentivize consumption of dairy products,” Dykes says. “We just had a new bill introduced last week on school milk with Congressman G.T. Thompson and Congressman Crowley.”
Dykes admits there won’t be a huge turnaround in the way Americans consume dairy products, but says there are incremental changes that can be made in conjunction with new and innovative products he thinks can make a difference. In addition, Americans are returning to full-fat diets. Brown says that will help the price outlook.
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