RaboResearch forecasts strong dairy margins in the U.S. due to tight milk supplies and high demand, predicting favorable conditions for producers into 2024.
RaboResearch, a leading agricultural research organization, has released a report indicating promising conditions for dairy producers in the United States as the sector grapples with tight milk supplies and robust demand. Lucas Fuess, an agricultural economist with RaboResearch, asserts that these favorable market conditions are expected to persist through the end of the year and into 2024.
According to Fuess, the recent Class III milk price set by the USDA for September reached $23.34 per hundredweight, marking the highest price since June 2022. This increase is largely attributed to limited milk production coupled with stable domestic and international demand. Fuess stated, “We expect both higher milk prices and feed costs to be around their lowest levels in four or five years. Combining these factors, we’re looking at some of the healthiest margins we’ve seen in quite some time.”
The current market dynamics are noteworthy, as the U.S. has historically been a leader in increasing milk production. Fuess remarked on the rarity of prolonged stagnation in milk output compared to the previous year, highlighting that this has contributed to the current market conditions. Additionally, improved milk components, including higher protein and butterfat levels, have enabled processors to sustain product volumes even as supplies tighten.
Looking ahead, Fuess anticipates that milk production levels may reset in 2024, which could affect pricing structures. Despite this potential shift, he remains optimistic about dairy margins continuing to stay in profitable territory, bolstering resilience within the dairy sector.
With RaboResearch’s insights, dairy producers are positioned to navigate the current landscape effectively, capitalizing on the combination of favorable prices and manageable feed costs.
