Depressed Dairy Economics

National Milk Producers Federation, Senior Vice President of Membership Services and Strategic Initiatives, Chris Galen says that the industry is experiencing depressed margins.

“Some of that has to do with the fact that we had record high milk prices last year like many other commodities, and things have cooled off. Since then, however, things are still probably higher than we would like, particularly for input costs. So the higher feed grain prices and the lower milk prices mean that farmers' margins are going to be impressed. It'll probably bottom out here this summer. And then hopefully, we'll rebound as we get into the end of the year. So certainly last year was a really good year even with the higher inflated feed costs that we saw, but this year is a different story because the milk prices come down.”

As far as supply and demand.

“Last year we had a great story to tell we exported close to 20% of all the milk we produce in this country. There's a lot of demand, particularly in Asia. This year, things have fallen off a bit from that catastrophically but the export conditions are tougher. Some of it is there are signs that China's economy is cooling and they're a big driver of what happens in Asia. Some of it is just the reactions to the high prices that we've seen both domestically and internationally.”

Galen says that slowing economies in the US and abroad is also impacting consumer behavior, which equates to lower prices for dairy producers.