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Cropp: Dairy Situation & Outlook

Cropp: Dairy Situation & Outlook
University of Wisconsin-Madison professor emeritus Dr. Bob Cropp weighed in on last Friday’s September Milk Production report, stating that the report shows cow numbers higher in July than February, but down both for August and September.
September cow numbers were down 19,000 head from February and were just 0.1% higher than a year ago. While cow slaughter has been running about 3% higher than a year ago in recent weeks, the January cattle inventory report showed more than enough replacements to grow the nation’s cow herd, according to Cropp.
“With dairy producers facing much more favorable margins (returns over feed cost) than a year ago, it is surprising that there weren’t more cows for September than what this report shows,” he said.
“Milk per cow for September was estimated to be just 0.8% higher than a year ago. This was also a smaller increase than expected since milk per cow for September a year ago was running 0.5% below the previous year. The net result was September milk production only 1.0% higher than a year ago.”
With respect to milk prices, Cropp said increased domestic sales and strong exports both the Class III and Class IV price will show further strength for November. A November Class III price of about $18.75/cwt. and a Class IV price of about $20.60/cwt. seems likely.
At these milk prices and lower feed costs than a year ago, milk production
will continue to run above a year ago, Cropp predicted. However, with this last USDA report on September milk production, perhaps the increase in milk production may not be as strong as expected. More milk and after seasonal orders of butter and cheese are filled milk prices will begin to decline by December.
The Class III price may stay near $18.00/cwt. and the Class IV price above $20.00/cwt., according to Cropp. For the first quarter of next year the Class III price could stay in the low $17s and the Class IV price in the mid‐$19s. With the recent increase in cheese prices Class III futures also strengthened for November and December and for the first quarter of next year, and are close to these predictions.