Don’t expect 2024 milk prices to come close to 2022’s record-setting haul, but there’s still profitability for growers as they head into the second half of the year, according to Tara Parr, vice president of agribusiness lending for GreenStone Farm Credit Services. “Milk prices are looking to be better than last year if current markets hold, and significantly higher than the last eight years (minus 2022),” she adds.
Domestic and international demand for cheese have both seen increases—with international demand being a driving factor – while declines in fluid milk demand have been replaced by cheese and butterfat products, she says.
Joe Diglio, president and CEO of Michigan Milk Producers Association, expects milk classes – Class III not as much – to continue to strengthen in the future. “It might bring the all-milk price closer to not just last year's numbers, but two year’s ago numbers – into the $20 to $23 (hundredweight) range,” he says.
Tight global dairy supplies will make U.S. dairy products competitive, especially with feed prices much lower than they’ve been in the last three years. “However, with lower feed costs in 2024 there likely won’t be any DMC (Dairy Margin Coverage) payments,” she says. “Still, it is a good risk management strategy. With inflation still hanging around, input costs and labor costs will remain high.”
Butter prices are also supporting this run-up in milk. “We are likely to see record butter prices in 2024,” Parr says.
Cow numbers are lower than a year ago, but milk production and components are both expected to increase per cow in 2024.
Cull cow and feeder calf markets should stay strong in 2024. “But along with that, we are also seeing fewer replacement heifers,” Parr says. “Lower heifer inventories will make it hard for the U.S. dairy herd to expand at any sort of fast pace, and replacements will continue to be costly.”
The dairy industry has seen a huge investment in renewable energy programs, and they continue to be an important opportunity for dairy operations. “From methane digesters to solar arrays, the push for renewable energy will continue,” she adds.
Spring flush not what was anticipated
With much of the Great Lakes experiencing a mild winter, Diglio, expected to see an early spring milk flush spread out over several months. Normally, the March-April-May timeframe can push production up as much as 5%. “That’s generally where you start to get a glut of milk, but we just didn’t see that and it’s sort of an anomaly to some extent,” he says.
There are major influences, he believes, that swayed production:
Interest rates creating uncertainty. “There was a fear of inflation and what might happen with volatile financial markets, and concern about paying bills,” says Diglio, who notes the downward thrust on expansion decisions and equipment purchases.
Cull cow prices escalate. “Cows were not readily available to be added into the herds,” he says.
Access to capital is tight. “Coming off a year where margins were tight and if you throw in years of depressed equity positions for these dairy producers, access to capital became strenuous. Cash flow of operations was sometimes just not there,” he says.
The threat of avian flu. Avian flu has infected several dairies since the first of April. “It can impact production,” Diglio says.
High heat in June. The Great Lakes region saw several 90-plus days with high humidity in June. “We're starting to see the retraction of production just based on these heat elements,” he says.
Labor concerns: “Producers continue to struggle to find and keep labor on the farm,” he says.
“The combination of all of these things really kind of took us through a spring flush in a unique way where growth just wasn't there like the normal 2-3% percent normally experienced. We’re starting to see some growth now, but barely a percentage or two above seasonality growth.”
What has the market done?
A lot of cheese production is putting pressure on the cheese price. “We did start to see a little bit of retraction on the Class III price,” he says. “That ultimately led to maybe a bit of a disconnect between the other classes and the marketplace, whether that’s fluid milk or Class II milk, which is used in soft dairy products like cottage cheese, yogurt, ice cream and such. With the powder and butter market, Class IV, the demand side stayed static and stayed up there, bringing a buyer concern it there was going to be enough of that product in the marketplace for future months? When buyers start to consider that, you ultimately get stability within those class prices. And then, in some recent cases, strength, and that's what you're starting to see now.”
