Professor Bob Cropp’s May 2015 Dairy Situation & Outlook full report is now available for download at UW Understanding Dairy Markets. Also, for a video podcast including Dr. Bob Cropp and Dr. Mark Stephenson discussing the May 2015 Dairy Situation & Outlook, please visit Program on Dairy Markets & Policy.
The following is a portion of that report:
There is uncertainty as to where milk prices are headed for the reminder of the year. Dairy futures have prices to continue to show strength. Class III futures are in the $17’s by September and for the remainder of the year. Class IV futures reach the $15’s by August and the $16’s for November and December. But, there is a concern that buyers of cheese have been building inventory and will not be as active in purchases going into summer and fall. Dairy exports may not improve as much as earlier anticipated and will stay below year ago levels. Prices on the Global Dairy Trade have shown further weakness and keep prices below U.S. prices. China’s milk production has improved, their economy has slowed some and it is uncertain to what extent China will become more active later this year in importing dairy products. The world milk supply may be higher than earlier anticipated with New Zealand’s milk production now anticipated to turn out higher than earlier predicted with improved rainfall, and the quota on milk production has ended in the EU. It is quite possible that milk prices could weaken some June through July before showing some strength this fall. It depends a lot on how milk production plays out for the remainder of the year. USDA is now forecasting milk production to end the year just 1.3% higher than last year. An increase in milk production well below 2% is bullish for milk prices. At this time it doesn’t appear that milk prices could either fall or increase sharply for the remainder of the year. Prices could still average $6 to $7 lower than the record high prices of last year. But, with lower feed prices than last year margins (returns over feed costs) are still conducive to increased milk production.