$15 milk?

By Susan Harlow, editor, Northeast DairyBusiness

Predicting dairy prices is like “Lewis and Clark trying to figure out the west of the Mississippi by looking at a map of Pennsylvania,” said Bob Wellington, senior economist for dairy cooperative Agri-Mark Inc., Methuen, Mass.  But despite the difficulty of projecting in a volatile market, Wellington said producers are likely to see $15 per cwt. milk next spring and winter, with a 2009 average no higher than $17. 
“There’s no great recovery, given what we know now,” he told the Northeast Dairy Leadership Team, at its meeting Oct. 7 in Binghamton, N.Y.
    Blame it on supply and demand that are out of whack. Strong 2007 milk prices “smothered” demand for dairy products, Wellington said. There’s also the strengthening U.S. dollar, China’s melamine scandal, and more milk produced by Australia and New Zealand, which are emerging from a drought.
     Wellington said he advises producers to know their production costs in order to help them get through 2009. Dropping feed costs are another factor to consider. Any Milk Income Loss Contract payments will be calculated with the new feed adjuster;  lower feed costs won’t help boost the payment.
   “A year ago we were as close to a competitive advantage over the West as we’ve ever been,” Wellington said. High fuel costs and homegrown forages gave the Northeast that edge, but the advantage is shifting back to the West now, Wellington said.