Bright spots visible in the American dairy market

The average milk price in the United States this year is expected to be $0,57 per cwt lower than last year. Converted, this amounts to a decrease in the milk price of approximately €1,15 per 100 kilos. The US Department of Agriculture reports this in the most recent WASDE report. According to the ministry, this brings the average milk price to $17,75 per cwt, or about €35,70 per 100 kilos. A year earlier, the average milk price was approximately €36,80 per 100 kilos.

The lower Class III milk price in particular contributes to the total decrease. The expectation for the price of milk in that class is currently $16,75 per cwt, while last year an average of $18,16 per cwt was achieved. Milk prices are also lower compared to this period of the year. February's Class III milk price is $15,75 per cwt, which is $0,29 lower than in January and $1,25 lower than in February 2020.

Expected less milk
A positive development for milk prices is that the USDA expects milk production to be more than 45.000 tons lower than previously expected, at 102 million tons. This is mainly due to the expected lower production per cow. However, this is still a record level and an increase of 1,8% compared to last year. This is because the lower production per cow is compensated by one larger herd.

Another reason for the US Department of Agriculture to take a more positive view of the dairy market is that price expectations for cheese (+$0,50), skim milk powder (+$1,10) and butter (+$0,20) have all improved. As a result, the milk price outlook for 2021 was largely higher than last month's forecast. A higher milk price is also necessary, because feed costs continue to rise. This is driven by the high quotations of corn, wheat and soy, among others, on the CBoT in Chicago.