Dairy Farmers Could Face Another Year of Disturbingly Low Milk Prices

 One would have thought there would have been some large payments again now that milk prices are as low as they are, but that is not the case. The November income over feed price was $9.58, because feed prices declined, and milk price inched higher from October. There was no payment under the DMC program for the month. The was the highest income over feed price since December 2022.

Nothing has been released as to a signup for 2024. Once the signup period is released, it will be made retroactive. There has been some hope the cap for DMC would be raised from the current 5 million pounds to 7 million pounds or 8 million pounds. Both levels have been circulated as possibilities. It looks as if that may not happen as the farm bill has been extended for another year and it is unlikely any special provision will be made ahead of a new farm bill.

The price difference between cheese and butter continues to keep a substantial price premium of Class IV over Class III. January showed over a $4.00 premium of Class IV over Class III with over a $3.50 premium in February. In fact, Class IV futures have a premium of more than $1.00 throughout this year according to the current futures prices. This is like what it was during much of 2023. It may take some time for butter and cheese prices to move closer together under the current market fundamentals.

Domestic demand for butter remains rather strong and has been able to absorb much of the decrease that has taken place in the international market. Butter exports were substantially lower in 2023 than in 2022. Year-to -date exports were down 47.7% from the same period the previous year. Yet, price did reach to a new record in October. Now it looks as if price could settle into a sideways pattern again like the first half of last year. Churning is active with plentiful cream supply. This should result in sufficient butter supply to meet demand without concern over supply.

There is no concern over milk supply currently which may leave upside price potential limited. Mild weather so far in most areas of the country has been conducive for cow comfort along with good feed quality in most areas. Culling has not been as heavy as had been anticipated. This may be the pattern for a period as it seems most farms want to keep stalls full and milk flowing to hopefully pay the bills. The hope is that depressed milk prices will be short lived. However, without a significant increase in demand or tighter milk supply or both, low prices may be with us for a longer duration.