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CIH: Dairy margins show August deterioration

CIH: Dairy margins show August deterioration
With the exception of spot Q3, dairy margins generally deteriorated since the end of July, due to a sharp drop in milk prices that was not completely offset by lower feed costs, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging, LLC. Forward margin projections have now dropped back below the 80th percentile in Q4, with margins in Q1 and Q2 now below the 70th percentile of the previous 10 years.
Milk prices have come under pressure, as recently improved dairy production margins have given rise to expectations of expanding milk production. While recent milk production trends aren’t necessarily signaling growth, dairy cow slaughter rates have been declining. Producers likely will continue enjoying elevated cow cull revenue due to smaller numbers of cattle on feed and lower beef production; however, better dairy margins will likely lead to greater heifer retention on the farm.
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