The problem with predicting when dairy markets will recover is that we still don’t know when dairy markets will stop falling.
While the rate of drop has certainly eased, prices for butter and powders are still falling.
Some products such as cheese are seeing a bit of a price increase from week to week, but that could be what is often termed a dead cat bounce.
There is no escaping that everything is negative and the market sentiment is very bearish, even more bearish than in 2023, which is the last time dairy markets fell.
At that time, global milk supplies were depressed and even though demand was poor, there was a quick recovery as soon as demand increased.
The issue in the current downturn though is deeper and arguably more fundamental.
In the past, when farmers in the US experienced a milk price downturn, they culled hard and reduced feed to reduce costs.
However, the same incentive to cull hard doesn’t exist today. OK, beef prices are high, but so too are calf prices.
US calf prices are at record prices for day- and week-old calves at over €1,400/head.
These prices are high and mean that farmers are hanging on to cows for longer in order to get a calf on the ground and maybe then sell the cow and dropped calf. The key point here is that the signals for US farmers to slow down production aren’t as obvious as they were in the past. If they don’t slow down, then supply will remain high and prices low. Low feed prices is another reason to be pessimistic.
The problem with predicting when dairy markets will recover is that we still don’t know when dairy markets will stop falling.
While the rate of drop has certainly eased, prices for butter and powders are still falling.
Some products such as cheese are seeing a bit of a price increase from week to week, but that could be what is often termed a dead cat bounce.
There is no escaping that everything is negative and the market sentiment is very bearish, even more bearish than in 2023, which is the last time dairy markets fell.
At that time, global milk supplies were depressed and even though demand was poor, there was a quick recovery as soon as demand increased.
The issue in the current downturn though is deeper and arguably more fundamental.
In the past, when farmers in the US experienced a milk price downturn, they culled hard and reduced feed to reduce costs.
However, the same incentive to cull hard doesn’t exist today. OK, beef prices are high, but so too are calf prices.
US calf prices are at record prices for day- and week-old calves at over €1,400/head.
These prices are high and mean that farmers are hanging on to cows for longer in order to get a calf on the ground and maybe then sell the cow and dropped calf. The key point here is that the signals for US farmers to slow down production aren’t as obvious as they were in the past. If they don’t slow down, then supply will remain high and prices low. Low feed prices is another reason to be pessimistic.
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