'US dairy sector will be better in 2020'

Cropp predicts that the American milk price (Class III) this year will be $2,20 per cwt higher than last year. Converted to euros, this is approximately €1,99 per 50,8 kilos. For 2020, Cropp expects the milk price to be another $1 to $1,20 per cwt higher. Stephenson is even a little more optimistic. In the first half of the year, the two analysts expect a milk price of $2 per cwt and in the second half of the year $17 per cwt: €18 and €15,43 per 16,34 kilos respectively.

Little expansion
One of the reasons why next year looks better according to dairy economists is the fact that little expansion is expected in the sector. In recent years, many dairy farmers have thrown in the towel due to the high cost price and low milk price. Production is reportedly not going to increase significantly to expect Stephenson and Cropp. Another factor is that the feed is not of very high quality, which means the cost price is lower than in other years.

On the other hand, domestic demand is good and exports of American dairy products are increasing rapidly. There also seems to be good news in store regarding the trade agreement between Japan and the United States. "In other words: the cost price decreases and the opportunities increase," the dairy economists claim.

Bankruptcy of Dean Foods
Something that can put a negative spin on Cropp and Stephenson's expectations is the bankruptcy from Dean Foods. The largest dairy factory in the United States controls at least 30% of fluid milk sales and about 10% of total milk sales. Yet analyst Stephenson expects that most (dairy) farmers will not notice this. "I don't expect farmers not to be paid for their milk."

Cropp shares that view. "The worst-case scenario is that several Dean Foods factories are completely closed, for example because they are too old. This could then increase costs for dairy farmers in those regions, because the transport distance will then increase."