Dairy prices
The U.S. dairy industry is coming off a pretty good year in 2022. Leonard Polzin, extension dairy markets and policy outreach specialist with the University of Wisconsin, says 2022 was solid..
“We had some good margins across the board. There are one or two months there where it might have been a little tighter, but all in all, I'd say as far as profitability goes on the farm, definitely a good year. Looking forward, I would say, especially on the farm producer level, I wouldn't hold my breath for the same sort of year. So, part of that is because it's always good to be a little proactive, making sure you're taking advantage of some of those risk-management opportunities that are out there.”
Some factors kept a lid on prices in 2022.
“A couple of things that kept milk prices down last year were feed cost and the cost of expansion. Cow numbers did come off of their bottom, off of their low, but we saw that leveling out. So, as we saw this leveling out, that kept production from increasing on a year-over-year basis. So, we did come in almost flat to just a hair above the year previously as far as U.S. production goes, but the reason for that is increased efficiency in the national herd.”
Looking ahead to the rest of 2023, there may be some downward pressure on dairy prices, especially in the overseas markets.
“As we go forward, if these profit margins continue to hold and expansion happens within the national heard, then it's not unlikely to see some downward pressure on those margins. Another thing to think about is not only our numbers but what's happening in the international market. We've been fortunate this last year. While our products on the international market have been priced a bit higher, we're still seeing good net revenues from our exports. But as we go forward, when other countries have maybe a little bit additional output capacity in the coming year, and as world markets have had a little more product in them, it's not unreasonable to see our prices come down to stay competitive there.”
