Market Reports

Dairy producers cannot afford to pay this much for feed unless milk prices remain high. The market is well aware that global dairy stocks are relatively low, and that output is shrinking. So, for now, milk prices are climbing nearly step for step with the feed market to deter further declines in milk production.

High feed costs and pricey energy will quickly add up on the farm. Feed and energy costs are even higher in Europe, which will further deter growth on the continent.

In December, milk production among the world’s five largest dairy exporters fell 1.3% below December 2020, the steepest decline in five years. At 19 billion pounds, U.S. milk production was 1.6% lower than in January 2021, the steepest decline since March 2004.

Butter and Cheddar reached all-time highs at the Global Dairy Trade (GDT) auction on Tuesday, while both skim milk powder (SMP) and whole milk powder (WMP) prices climbed to fresh seven-year highs.

Buyers and sellers jockeyed to exert their influence on the trade. The action in the cheese markets was relatively subdued, however important movements in the nonfat dry milk, whey, and especially butter markets, kept observers on their toes.

The phenomenon is certainly not limited to the United States. Market observers watched the Global Dairy Trade index climb on Tuesday by 4.1%, with the index reaching the highest level seen since February 2014.