Dairy Ends the Year on a Lower Note

Chris Galen, senior vice president of member services at the National Milk Producers Federation, says the dairy economic outlook is not as strong as it appeared earlier in the year. Increased supply has ramped up production. And while markets will eventually correct, the dairy sector, especially butter, has felt the impact,

“Because we saw high prices last year and the first part of this year, we've seen more supply, and that's particularly true in the area of butter fat, probably one of the biggest stories for dairy this year has just been the I don't want to use the word collapse, but certainly the dramatic decline in butter prices. And that's just because we have a lot more cream coming off farms. It has to go somewhere. Some of it's going into cheese, but a lot of it's being made in the butter. And that's driven the price of butter at the Chicago Mercantile Exchange down to in $1.40s, which is a really low price.”

Historically, with milk and cream production on a rise, prices are under downward pressure, even so Galen says producer margins are still holding up.

“We haven't seen any payouts yet this year from the dairy margin coverage program, because commodity prices in the form of feed grains have also dropped. So we've seen lower dairy prices, but also lower feed prices, so margins are still holding on.”

Chris Galen with the National Milk Producers Federation.