Dairy
Milk price forecasts, initially bullish for 2020, have significantly deteriorated due to the coronavirus. It is difficult to make reasonable projections given all the market uncertainty right now.
- The coronavirus crisis and the related shutdown of schools and restaurants has put dairy in a situation we have not seen since 2009. Futures markets have fallen and remain weak. Milk is being dumped on a regular basis as the supply chain struggles to adapt to the rapid shift in demand for dairy products.
- The only slightly good news is that feed costs should remain low and may decline.
- In addition to disruption in domestic markets, international markets are down as well due to disruptions in shipping, the strengthening U.S. dollar, and the coronavirus impacts being felt in overseas markets.
- Dairy Margin Coverage, Dairy Revenue Protection and Livestock Gross Margin contracts will have significant payouts for those who purchased them ahead of the crisis.
- U.S. milk production increased by 2.0% year-over-year in February 2020. The number of cows increased, as well as productivity per cow.
- On a state-by-state basis, in February, there were gains in production in California, Idaho, Michigan, New York, Texas and others while Wisconsin and Vermont both showed decreases.
- National cow numbers increased 0.4% year-over-year (+39,000 head). New York had a decrease of 1,000 head from last year, at 626,000.3
- Prior to the coronavirus disruptions, dairy exports were strong. 2019 export value topped $6 billion for the first time since 2014. Overall value increased by 8% over the prior year.4 Total volume of exports was still lower, largely because of lower sales of whey and lactose to China due to tariffs. In the first two months of 2020, both export volume and value were significantly greater than Jan.-Feb. 2019. This trend of increasing exports is expected to turn lower in the months ahead.
- Some smaller cooperatives and producers without long-term marketing arrangements have lost their markets.
- Some larger dairy cooperatives are implementing “base excess” pricing programs to reduce the supply.
1 Agri-Mark Price Forecast
2 Upstate Niagara Price Forecast
3 USDA / NASS Milk Production Report
4 US Dairy Export Council
