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Dairy

Avg. Price per Cwt.

2018

2019

2020 F

2021 F

Boston Blend Price1

16.09

18.12

17.20

18.05

Avg. WNY Blend2

15.06

17.10

16.06

16.01

 F=forecast

  • The coronavirus situation precipitated a serious decline in the first half of the year, but milk prices have since recovered better than originally expected. We may be seeing price declines next year, although analysts’ projections differ at this early stage.
  • In 2019, milk prices increased to an average of $18.12, which resulted in net earnings of $447 per cow for the DFS sample, meaning farmers were coming off a relatively good year at the beginning of 2020.
  • The COVID-19 pandemic seriously impacted dairy markets in Q2 2020. The near-total loss of institutional and foodservice markets, and the surge of demand from retail grocery stores severely strained processing and distribution capacity. Prices fell dramatically, and some farmers had to dump milk because processing plants were at capacity. Since then, however, things have adjusted to a “new normal”, excessive milk dumping has ended, and prices have recovered substantially.
  • The Boston blend price hit a low of $13.47 in May (falling from $19.28 in December 2019) but recovered to a peak of $19.08 in July. The Agri-Mark forecast (as of October 6, 2020) is for an average of $17.20/cwt. for the current year. This will be lower than 2019, but not nearly as bad as some earlier projections indicated.
  • The forecast for 2021 is mixed, with some analysts projecting an increase in average prices and others projecting a modest decline. There continues to be tremendous uncertainty in many areas, including what will happen with COVID-19 and will restaurants and schools remain open, will international demand remain strong, will trade disputes be a factor in exports, and other concerns.
  • Farms that were struggling last year will continue to do so in 2020 and some may consider exiting, especially those that have high levels of debt.
  • Milk production increases have been modest. National milk production increased by 1.9% in August, y-o-y, and by 0.5% for Q2 2020. New York production increased by 0.6% in August.
  • In the Northeast, most dairy cooperatives have implemented supply management programs disincentivizing excess milk production in an effort to bring production more in line with demand and processing capacity. These programs vary by coop, but most involve a higher price for the bulk of the farm’s production (80-90%), and a much lower price for milk production in excess which often has been marketed at distressed prices or hauled long distances to find a market. Thus, producers may have both a price impact (lower prices for the bulk of their milk production) as well as a volume impact (receiving little or nothing for a portion of their production). This has resulted in a reduction in top-line revenue for a number of producers.
  • Government-based risk management / support programs will prove to be critical for some farms. The Dairy Margin Coverage program (DMC), and Dairy Revenue Protection (DRP) programs will pay out significant amounts of money for at least the period from April-June. However, only about 19% of the milk production in New York has this risk management protection.
  • The USDA Coronavirus Food Assistance Program - Part 1 (CFAP) paid out $1.8 billion in purchases and direct relief for dairy farmers across the country. This includes $187 million in direct payments to dairy farms in FCE states ($164.3 million for NY). CFAP – Part 2 will pay an additional $1.20/cwt for production from April 1 through December 31, 2020.
    F=forecast


1  Agri-Mark Price Forecast
2 Upstate Niagara Price Forecast