September 2016 Dairy Outlook

Professor Bob Cropp’s September 2016 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  Dairy Situation & Outlook, please visit Program on Dairy Markets & Policy.

Below are sections of that report:
USDA’s milk production report showed August milk production 1.9% higher than a year ago. The July milk production was also revised up to a 1.6% increase. The increase in August was due to 16,000 more cows than a year ago, a 0.5% increase, and 1.4% more milk per cow. Despite some really low milk prices milk cow numbers have been increasing. Since the beginning of the year cow numbers have increased by 40,000 head. There are plenty of replacements to increase the cow numbers and cow slaughter has been 1.4% lower thus far this year.
Milk prices had a good run up but prices aren’t holding. The Class III price was a low of $12.76 in May and had increased to $16.91 in August. But, cheese prices have fallen which means lower milk prices again. On the CME, 40-pound cheddar blocks were as low as $1.27 per pound in May, but increased to $1.86 in August. Cheddar barrels were also as low as $1.27 per pound in May and increased to $1.88 in August. But, cheese prices have been falling in September. As of September 20th, 40-pound blocks were back down to $1.5975 per pound, the lowest since the end of June. Cheddar barrels were $1.5075 per pound, the lowest since early June. Dry whey prices have strengthened to $0.34 per pound. But, the much lower cheese prices will push the September Class III price to around $16.30, and in the mid to high $15’s for the remainder of the year. However, current Class III futures remain in the $16’s for the remainder of the year, but unless cheese prices rally some current cheese prices don’t support $16 plus Class III.

 For more information regarding dairy markets, please contact UW-Extension Dairy Markets Specialist Brian Gould or visit UW-Extension Understanding Dairy Markets.

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