The coronavirus pandemic has made for some wild times in dairy markets, which in turn have led to significant downturns in U.S. milk production.
May milk production at 18.8 billion pounds was down 1.1% year over year from almost 19.1 billion pounds in 2019, according to the National Agricultural Statistic Service.
“Definitely farmers have responded, reducing milk production — which is a factor we’re seeing in milk prices changes right now,” said Bob Cropp, University of Wisconsin dairy economist, in the latest “Dairy Situation and Outlook” podcast.
The price of milk used to make cream cheese, other spreadable cheeses and similar products, known as Class III milk, dropped from $17.05 a hundredweight in January to $12.14 in May. But the June price is looking like it’ll be $20 with a record increase from one month to the next, he said.
Lower milk production, government purchases, restaurants slowly opening and restocking food-service inventories were all factors, he said.
“It shows how sensitive this market is to relatively small changes, but that tightened things up,” he said.
There’s a lot of uncertainty as to where prices will go. Milk production will be going down seasonally with the hot summer months. Restaurants are opening, and processors will be building inventory for holiday demand.
“We could see those prices at least in the next quarter holding pretty good, said Mark Stephenson, fellow dairy economist at the university.
The big question is whether farmers will continue to hold down milk production. The other question is whether there’ll be another coronavirus outbreak that slows things down again, he said.
While 14 of the 24 reporting states decreased milk production year over year, milk flowed strong in others. May milk production was up in seven states.
“Farms are starting to react to these higher prices, at least in the West,” Stephenson said.