Experts predict higher milk prices this year

By Leah Call
MAA

The current dairy pricing scenario was caused by a variety of factors, including an abundance of supply and a decrease in demand, which has led to perhaps the most challenging time ever for dairy farmers. But after four long years of low milk prices, experts predict 2019 will offer some relief.

“I’m forecasting 2019 milk prices may be $1.10 to $1.25 higher than 2018,” said Mark Stephenson, director of dairy policy analysis at the University of Wisconsin-Madison. “That will help a lot of farms, no question about it, but that is not enough for them to feel like they are restored from these last four years. They need a bigger milk price than that.”

While his prediction for the majority of 2019 is tepid at best, Stephenson does expect that by the end of 2019 “we may be in the position to have a breakout on prices.”

That breakout will need to include improvements in trade. Canada and China made a direct hit on dairy incomes. The resulting inventory of storable dairy products, such as cheese and whey, continues to push down on milk prices, noted Stephenson. 

“If those tariffs got lifted and we could resume trade, it would help quite a bit,” he said, particularly in the case of China, which is the world’s largest buyer of whey products. “We (Wisconsin) are the leading manufacturer of whey products – so when we lose those markets, there is a problem.”

Increases in milk are caused by an oversupply, said Christopher Wolf, a professor in the Department of Agriculture, Food and Resource Economics at Michigan State University. He said expansion in the upper Midwest over the last decade added to that increase. 

“One thing that gets overlooked a lot is the cheap capital (contributing to the expansion),” he said. “And the fact that the upper Midwest is such a good place to grow forages…Some of the guys that had been out west and southwest came to the Midwest where they don’t have to worry about droughts as much.”

Wolf agrees with Stephenson that prices will rebound somewhat in 2019. “The second half of 2019 is looking not great, but average or above average, which right now seems great compared to what we have had,” he said.

One thing keeping a damper on prices and opportunities is the intervention stocks of dairy products held by the EU. 

“They are selling and releasing those,” Stephenson said. “They are about half gone…expect those to be gone before the end of the year. That will help prices have a chance to rebound.”

MSU’s Wolf said the price rebound will depend a lot on “trade and exchange rates” among other things. “Because dairy proteins and dairy fats are going to be in such high demand, I think the long term is really healthy. But all these producers who are under such extreme financial distress have got to make it through to that, and it can’t happen soon enough.” 

Boosting consumer demand

Dairy check-off programs are working to increase demand for dairy products nationally and internationally. The Dairy Farmers of Wisconsin (DFW) operates on the 90/90 rule – 90 percent of milk produced in Wisconsin goes into cheese, and 90 percent of Wisconsin cheese is sold outside the state’s border. 

“The majority of our focus is on building demand for Wisconsin cheese outside of the state,” said Suzanne Fanning, DFW chief marketing officer. 

DFW markets Wisconsin cheese to restaurant chains like Culvers and others throughout the nation. They also focus on research and education. 

“We work in schools, teaching kids that dairy is a part of a healthy diet,” Fanning said. “I think we have one of the most robust Fuel Up to Play 6o programs in the country.”

The organization facilitates in-store promotions and sampling at major grocery store chains, something that has proven to increase consumption of dairy products. 

“We found that the average weekly sales slip during a promotion is about six times that of a normal week,” Fanning said. “We also found that when consumers taste our products, they are nine times more likely to purchase. So we are trying to get our cheese in mouths as much as possible”

Cheese lovers nationwide can taste Wisconsin cheeses by hosting a cheese party through DFW’s Cheeselandia initiative. 

Launched in November 2018, Cheeselandia invites people to apply to host a party featuring an assortment of supplied Wisconsin artisan cheeses. 

“Cheeselandia is one of our major initiatives this year,” Fanning said. “We will have people host 300 cheese parties across the country. We’ve had people in 49 of 50 states apply.”

Other promotions include a recent four-minute segment on Fox and Friends and a presence at the South by Southwest, a popular film and music festival that is being held this month. Fanning said they also bring buyers and decision makers into the state to meet dairy farmers and cheesemakers.  

“Exit surveys show 90 percent of the participants report that coming to Wisconsin increased the amount of Wisconsin cheese they purchased,” Fanning said. “We make sure they understand that Wisconsin is truly a special place when it comes to dairy.”