Milk Prices: 2017 End-Of-Year Update

Early in the year, economists predicted that milk prices would raise nearly $2 per cwt during the year, but oversupply increased production and “baggage” from the previous two years tempered excitement over increased prices.

Guarded optimism was the common theme among industry experts.

Halfway into 2017, the outlook remained the same.

“Prices have by and large done what was expected with Class III pricing hitting $17,” said Andrew Novakovic, Ph.D. and the E.V. Baker Professor of Agricultural Economics at Cornell University.

While prices have risen in some cases, the increase has not been as much as the anticipated $2.

“We’ve seen an increase of $1.82 over this time last year,” said Catherine deRonde, an economist at Agri-Mark. “We’re expecting to see the price up to the $18 range by September.”

Even though that’s slightly less than expected, Novakovic said it’s far better than no increase at all. deRonde added that strong demand – specifically for high fat products – is keeping prices up further out into the future.

The oversupply of milk – particularly in the Northeast – is putting downward pressure on prices, deRonde said. The abundant supply may have a new outlet with the reported sale of the vacant Theo Muller plant in Batavia, New York.

On June 9, 2017, The Batavian reported that HP Hood will likely buy the 363,000-square-foot, state-of-the-art milk processing facility that has been vacant since December 2015.

“That would be a positive sign for dairy farms in New York and help move more raw milk off the market,” said Steve Ammerman, the public affairs manager at the New York Farm.

International markets continue to impact prices. “We have exposed ourselves to more and more international trade and that drives pricing,” Novakovic said. “Our prices domestically increase (or decrease) with prices in world markets.”

Big questions remain about export markets, which have a profound influence on milk prices and the current issue with ultra-filtered milk going into Canada is a prime example.

“As that market was closed off to New York dairy producers because of the change in Canadian pricing policy for the product, it put more milk on the market and is costing processors tens of millions of dollars,” Ammerman said.

With President Trump looking to renegotiate the North American Free Trade Agreement, there are pros and cons to consider.

“There are potential opportunities, especially with Canada, but we must be careful not to upset markets that already exist,” Ammerman said. “Mexico is the No. 1 importer of our dairy products, and a more restrictive trade policy with them could mean more difficult times for our farmers. Trade really is key to boosting milk prices.”

No one has a crystal ball that can accurately predict what will transpire in the remaining half year and into 2018. Hopefully, the higher milk prices in 2017 can help farmers stabilize and dig out of debt from challenges compounded in the past two years

“At this point, we’re predicting 2018 will look much the same as 2017,” deRonde said. “Hopefully demand and export will continue to support the movement of milk.”