MADISON, WI (SPECTRUM NEWS) — Milk prices are rebounding to high levels after coronavirus shutdowns forced them to plummet earlier in 2020.
According to the Chicago Mercantile Exchange class 3 milk prices in June are currently above $20 per hundredweight (cwt). In mid-April prices were down to $11/cwt.
“The markets took it away and they apparently giving it back now, so we've had some pretty strong demand,” said Mark Stephenson, economist and director of dairy policy analysis at the University of Wisconsin – Madison.
Prices climbed up for more than four years of being depressed in late 2019, getting near or above $20/cwt at times in November and December. Dairy farmers were expecting 2020 to finally be the year that pulled them out of the extended downturn in prices before the coronavirus pandemic hit.
When coronavirus restrictions hit restaurants and the food service industry shrunk, leading to a gap in dairy orders — particularly in cheese and butter.
Stephenson said the recent jump in prices is because of several factors. First grocery sales have increased during the pandemic, then the industry cut down on milk production in general — lowering the overall supply. For a while U.S. Cheese was trading far below world prices, leading to an uptick in dairy exports. Recently restaurants have increased orders again as restrictions are lifted. Additionally emergency government spending on things like farm food box programs that buy oversupplied products and donate them to pantries have kicked in.
“All those things put together just lead some real buoyancy to the markets,” Stephenson said. “It's really been the revival of demand that has given these prices back.”
The jump in prices has been great news for dairy farmers.
“Just across the industry there is a sigh of relief from people,” said Katy Schultz, part owner of Tri-Fecta Farms in Fox Lake. “I think it almost feels unfathomable, too good to be true right now, but given the past few month's poor prices that we've been paid we're going to need a few more months to help catch up from those things.”
Schultz is vice president of the Professional Dairy Producers of Wisconsin board. She says the price jump isn't just good for business, but it's been a morale boost for dairy farmers.
“This nice $20 bump on milk has really put a spark of hope into people that you know what we're going to get through it, we're going to make it, it'll be okay,” Schultz said.
Prices on the CME are projected to level off for the rest of the year — to about $16 or $17/cwt. Stephenson said that's not great, but it's livable.
“They would be more comfortable with something a little bit higher than that, but they could live at that price for a period of time, so it's a price that I think would be alright,” Stephenson said.
Stephenson said it's important to point out that the leveling off is still at this point a projection, and farmers should be ready for anything.
“Let's just keep an eye and see how events unfold,” Stephenson said.
Stephenson also cautions that the recovery from coronavirus is likely to be drawn out. The U.S. Is currently in a recession, and Stephenson thinks it will be a long and deep one.
“We need to kind of buckle up for the long haul on this, this is not a sprint,” Stephenson said.