Dairy price forecast 2015
Fourth audio in a series produced in concert with the Wisconsin Agricultural Economic Outlook Forum Wednesday, Jan. 21 on the UW-Madison campus. http://agoutlook.cals.wisc.edu/
KEYWORDS: Wisconsin Agricultural Outlook
Mark Stephenson, Dairy Policy Analyst
Department of Agricultural and Applied Economics
UW-Madison College of Agricultural and Life Sciences
Phone (608) 890-3755
3:05 – Total Time
0:19 – Milk prices expected to decline further
1:07 – Why milk prices are down
1:44 – How farmers may adjust
2:12 – An eye toward international milk markets
2:56 – Lead out
Sevie Kenyon: Taking a look into 2015 for the Wisconsin dairy business. We’re visiting today with Mark Stephenson Department of Agricultural and Applied Economics University of Wisconsin – Madison in the College of Agricultural and Life Sciences and I’m Sevie Kenyon.
Mark, what do our Wisconsin dairy producers have to look forward to this year?
Mark Stephenson: Well not another 2014 I’m afraid to say. 2014 was a great year. 2015 is going to be a substantial drop from that. In fact, I’m forecasting that farm milk prices here are going to be at least $7, (per) 100 weight lower than they were averaging last year, so that’s a huge drop. But I think it’s important for us to remember that this is a drop from the highest milk price year we ever had and you know, we need to think about it that way. I think the thing that we can comfort ourselves with is that feed prices are still going to remain quite a bit lower than they have been in previous years. The margins that we are looking at for farms are back in the normal range, they aren’t extraordinarily high like they were last year.
Sevie Kenyon: What factors are coming together to cause this change?
Mark Stephenson: We’ve got a lot of milk production. We had these terrific milk prices last year and a big price on any product is a market telling you we want more of that product. We’ve got milk production here in this country that’s been increasing substantially. Milk production in competing countries for export sales like New Zealand, the European Union, they’re all up 4% or more in milk production. So the world now has the milk that they wanted and now we have to start saying we need to tap on the brakes at least a little bit.
Sevie Kenyon: How do Wisconsin dairy producers adjust to the change?
Mark Stephenson: One of the things to recognize is that we also have the highest cull cow prices that we have ever had and it’s going to be important for us to look within the herd and just ask ourselves, “look some of those cows were ok to milk when milk prices were 24, 25 dollars 100 weight but maybe today they aren’t.” Maybe we need to think about culling the herd a little more heavily.
Sevie Kenyon: Mark, what changes can we anticipate in the international export markets?
Mark Stephenson: Last year China bought a lot, and bought early and when they had, I think, an adequate amount of inventory on their shores, or at least committed for sale there, they stopped. They stepped back out of the market place and so that was part of the reason we saw those world prices decline into what we are looking at in the next few months. China is not going to sit back forever. They will consume those inventories and they will be back in the market place. Now the thing with China is that it’s such a huge country that if they’re trying to fill those demand opportunities, they’re buying very large commitments of dairy product and so it does move the needle on world prices.
Sevie Kenyon: We’ve been visiting with Mark Stephenson Department of Agricultural and Applied Economics University of Wisconsin – Madison in the College of Agricultural and Life Sciences and I’m Sevie Kenyon.