Last week, Penn State Ag Economist Jim Dunn peeked into his dairy crystal ball for a look at where milk prices might be heading in the next couple months. He wasn't particularly happy with what he saw:
The Class III futures price for March is $0.31 under February's $17.25 per hundredweight. But April futures are $0.42 higher than March, at $17.36.
As of now, the March Class III futures price is projected at $16.94, the lowest projected for 2013. Right now, they look to peak at $18.75 in September and average $18.04 for the year.
Class IV milk futures milk rose to $17.75 for February, then dropped to $17.65 for March. Look for Class IV futures to average $18.06 for all of 2013.
Dunn's forecast for Pennsylvania's all-milk average price is $21.23 per hundred for 2013. That's up $1.20 a hundred over the 2012 average, peaking at $21.74 in September.
With spring coming on, rising milk production and no big cheese consumption periods nearby, cheese stocks are likely to stack higher. Since last month, both cheese blocks and whey have fallen about 6%. Butter followed a similar pattern, but bumped up at February's end. Over the past month, butter prices have risen 2.3% and skim-milk powder has dropped 1.8%. High inventories and disappointing disappearance makes butter prices vulnerable to softening.
While export demand may currently be okay, domestic demand is dicey, suggests Dunn. Uncertainty about the economy is still dragging on domestic markets.
Export strength factors weakening
A strengthening U.S. dollar relative to the Euro and the Australia and New Zealand dollars make our exports slightly less competitive, says Dunn. Weakening of the Australian and New Zealand dollars is tied to potential problems with China's economy.