Dairy cows

While U.S. milk prices showed some improvement in March, it’s going to be a long road to recovery — and largely dependent on domestic milk production this summer.

While spring might be a time of optimism, there are still some serious concerns looming. Increasing milk production in the U.S. and Europe, relatively high stocks of U.S. dairy products and trade uncertainties are a few, according to economists at the University of Wisconsin.

U.S. milk production was up 1.8 percent in January and February year over year, and that’s a lot of milk, Bob Cropp, an economist at the university said in the latest Dairy Situation and Outlook podcast.

Low milk prices are taking a toll in some areas of the country, such as the Upper Midwest and the Northeast, but aren’t slowing production in other areas, he said.

Stocks of butter and cheese increased from January to February and are up 7.2 percent year over year, maybe not burdensome but on the heavy side, he said.

But exports improved at the end of 2017 and were pretty good in January. Exports were up 3 percent for powder, 19 percent for cheese and 30 percent for dry whey exports. Only butter exports were down, he said.

Exports and domestic demand will improve milk prices in March, he said.

He’s looking for a 90-cent per hundredweight increase in Class III prices over February to $14.30 and a 40-cent increase to Class IV prices to $13.25.

“We’re probably at the bottom of our prices; we’re climbing our way back,” economist Mark Stephenson said on the podcast.

“But we don’t see anything that looks like a major explosion in price increases yet, and it may not be until we get well into 2019,” he said.

U.S. dairy products are very competitive right now, with prices below the world market. That’s good for exports but doesn’t translate well as far as milk prices, Cropp said.

Milk production is down in New Zealand, and recent fires took out about 4,000 cows in Australia. Production in the EU is still very strong, however, and will more than make up for any losses in Oceania. But the world economy has improved a little, he said.

“If China is in there, I still think there’s an opportunity to grow our exports some. But it’s going to be a competitive year to expand those exports,” he said.

What the U.S. doesn’t need are any trade wars, Stephenson said.

“If we have just a little bit more marginal product staying at home, that’s not going to be a good thing when we’re trying to recover,” he said.

Cropp said he also has concerns along that line. Every time he picks up the newspaper, he reads that the EU is trying to make a new trade deal with somebody. Meanwhile the U.S. is focused on reviewing its existing trade deals.

For now, it looks like milk prices will slowly improve. Class III could hit $15 by July and possibly top out near $16 by October, averaging no more than $15 for the year, compared with $16.17 last year. Class IV could get up to $14 by July but remain below $15 and average no higher than $14 for the year, compared with $15.16 last year, he said.