Market Reports

In Europe the high costs of physical expansions, additional labor, replacement heifers, and feed costs, when coupled with market uncertainty, creates a risk level that prevents widespread expansion. The same factors are hampering milk output on this side of the Atlantic as well.

It’s unusual to see premiums at this time of year, and it’s raising concerns about summer supplies. If driers and cheese vats aren’t full to the brim amid mild May temperatures, how much will output slow in the July and August heat?

As indications of slower milk output came to the fore, milk futures climbed. Dairy producers will cash some record-shattering milk checks next month, as May Class III and IV contracts are both a little above $25 and the Class I base price is $25.45.

The dairy markets are still concerned about demand. Global milk output is growing slowly and dairy product inventories are not burdensome. But tight supplies are not enough to lift the market when prices are already quite lofty. Consumption must be healthy too.

For months, the dairy markets have focused on shrinking global milk output and barriers to rapid expansion. Tight supplies pushed dairy prices to record highs. Now, concerns about demand have come to the fore.

Dairy markets moved this way and that without much conviction this week. Prices are historically lofty, but not high enough to bring on a lot of new milk in a world of $8 corn and $2,000 springers. At what point do high prices hinder demand?