Higher milk prices likely in 2020
David P. Anderson
2019 was another difficult year for many dairy farmers across the country. Another year of low prices forced more producers out of business. Low prices and drought forced farmers into bankruptcy in Australia, as well, more evidence that U.S. farmers operate in a global market. Yet, by late in the year some milk product prices were looking up with Class III milk breaking $20 per cwt.
Low milk prices and poor returns forced weekly dairy cow slaughter to levels not seen since the dairy buyouts in the mid-1980s. Over 70,000 head per week went to market over two months in February and March before slaughter declined to levels seen the year before. Large dairy cow slaughter combined with cyclically larger beef cow slaughter led to sharply lower cull cow prices for a large part of the year. Rising milk prices should limit cow slaughter in 2020.
Even with high cow culling, by September cow numbers had reversed course and were growing again. Growing milk production per cow combined with more cows led to growing milk production. Milk production in Texas led the way with the almost 7 percent year-over-year growth, the largest growth rate of any state. Milk production in the Texas-New Mexico region was up almost 4 percent over 2018.
Milk prices are likely to increase over 2019 levels. Cheese prices have been an underlying area of strength as cheddar prices have increased steadily all year before jumping to $2.15 per pound in November. Prices normally peak at that time of the year before falling to close out a year. Rising prices set the stage for better prices in 2020. While cheese prices have been a standout, butter prices lagged below a year ago late in 2019, as did whey prices.
Milk production is also likely to increase in 2020. As milk production increases, sustained price increases will require growing use. Expanded use can come from domestic or export sources. Demand growth in excess of production will have to occur to boost prices.
While prices are starting the year higher, several areas will be important in 2020. As with all agricultural commodities, trade will be a key this year, as it has been a source of uncertainty. Export growth will be important as the industry is more trade dependent. Feed prices and quality will be a concern moving deeper into 2020. The host of problems in the 2019 growing season led to some higher prices and tighter supplies for some producers. Concerns about feed quality may impact some dairies in parts of the country. The last key for the market is consumer demand. While per capita consumption of all dairy products has been growing, fluid milk consumption has declined. But, whole milk consumption has been growing in recent years, while reduced fat fluid milk has continued to decline. Yogurt consumption has struggled recently after being a tremendous growth area. A growing economy will aid demand. But, consumer tastes and preferences and diet trends will be a key in 2020.