Economist Projects Potential Improvements in Dairy Returns for 2024
Source: The DairyNews
Scott Brown, an economist from the University of Missouri Extension, suggests that while dairy product prices in 2024 are expected to resemble those of the previous year, net returns for dairy farmers may see an improvement.
Speaking at the 2024 Missouri Dairy Expo, Brown emphasized that average weather conditions and feed costs will play crucial roles in shaping this year's outlook.
In a press release, Brown noted, "The outlook hinges on demand. Domestically, consumers may have less to spend on dairy, interest rates are higher, there’s less COVID financial help, and the economy is slower."
On the supply side, milk production has seen a decline over the past seven months compared to the previous year.
"Dairy is moving toward a better position," Brown stated. "While not experiencing significant spikes, there's a trend towards strengthening."
Brown highlighted a decrease in dairy cow inventory since early 2023, particularly in states such as California, Colorado, and Texas, which had previously shown growth.
Despite lower-than-expected cheese prices due to sluggish demand, recent improvements in cheese prices have provided some relief to milk prices.
Global demand has also not met expectations, with reduced sales of whole milk and skim milk powder to China due to its weaker economy and a stronger U.S. dollar. However, Mexico remains a crucial market for U.S. dairy farmers, being the largest importer of powdered milk products by value.
In terms of global milk supply, Australia is anticipated to witness growth in 2024 as it recovers from drought, while U.S. growth is projected to be slightly higher.
Looking ahead, Brown anticipates significant impacts from the federal milk order hearing in the ongoing debate on the next farm bill. He suggests that the Dairy Margin Coverage (DMC) program in the upcoming farm bill may resemble the one adopted in 2018 but could offer updates to production history eligibility.
Additionally, Brown expects the USDA to propose a rule from the milk marketing order hearing this year, potentially leading to substantial changes in how minimum milk prices are determined through federal orders.
Despite challenges, Brown notes the usefulness of programs like DMC to Missouri dairy producers, as the state continues to experience a decline in dairy cow inventory and anticipates smaller herd sizes in the coming year.
In a press release, Brown noted, "The outlook hinges on demand. Domestically, consumers may have less to spend on dairy, interest rates are higher, there’s less COVID financial help, and the economy is slower."
On the supply side, milk production has seen a decline over the past seven months compared to the previous year.
"Dairy is moving toward a better position," Brown stated. "While not experiencing significant spikes, there's a trend towards strengthening."
Brown highlighted a decrease in dairy cow inventory since early 2023, particularly in states such as California, Colorado, and Texas, which had previously shown growth.
Despite lower-than-expected cheese prices due to sluggish demand, recent improvements in cheese prices have provided some relief to milk prices.
Global demand has also not met expectations, with reduced sales of whole milk and skim milk powder to China due to its weaker economy and a stronger U.S. dollar. However, Mexico remains a crucial market for U.S. dairy farmers, being the largest importer of powdered milk products by value.
In terms of global milk supply, Australia is anticipated to witness growth in 2024 as it recovers from drought, while U.S. growth is projected to be slightly higher.
Looking ahead, Brown anticipates significant impacts from the federal milk order hearing in the ongoing debate on the next farm bill. He suggests that the Dairy Margin Coverage (DMC) program in the upcoming farm bill may resemble the one adopted in 2018 but could offer updates to production history eligibility.
Additionally, Brown expects the USDA to propose a rule from the milk marketing order hearing this year, potentially leading to substantial changes in how minimum milk prices are determined through federal orders.
Despite challenges, Brown notes the usefulness of programs like DMC to Missouri dairy producers, as the state continues to experience a decline in dairy cow inventory and anticipates smaller herd sizes in the coming year.
