Dairy farmers shouldn't expect record milk prices this year, but they can expect moderately strong prices for the rest of the year and early 2006, according to a Purdue University Cooperative Extension Service dairy specialist.
"It looks like we're going to finish up 2005 with an all-milk price of around $15.07," says Mike Schutz. "That's actually only about $1 lower than the record price from 2004."
Looking into early 2006, USDA forecasts milk prices to be around $13.35. "Those are solid prices," Schutz says. "I think most dairy producers probably budget a little bit less than that, so it's good news for producers."
This summer's weather may help keep milk prices up. "With prolonged periods of heat and humidity like we've had over this past summer, cows really begin to drop in production. Frankly, their appetite is reduced, they do not consume as much feed and there can be more problems with mastitis," Schutz says.
Eventually that will begin to reduce milk production, and that lower production could linger into the fall, he says.
It's also possible that the weather caused lower yields and poor quality crops, which could translate into lower milk production.
"If forage quality is reduced because of some localized drought conditions here in Indiana and throughout the Midwest, that could impact production per cow," Schutz says. "But relative to other states in the Midwest, I think Indiana's well-situated to maintain milk production per cow. As the harvest progresses, the effects of spotty growing conditions and a relatively long period of heat and humidity will become clearer."
There is a slight chance that prices could come down because there's so much milk being produced.
The other question that's still out there is how long will the demand for dairy products be able to keep up with the tremendous amount of milk that's being produced," Schutz says.
Both milk production per cow and overall dairy cow numbers are up across the nation like never before. In addition, Monsanto is back to normal delivery levels for Posilac, its bovine somatotropin (BST) protein. In 2004, the company decreased delivery of Posilac to customers by 50 percent because of problems in a manufacturing facility.
Overall, Schutz says, he doesn't see a big change in milk prices. "While the sheer volume of milk production will cap prices to some extent, as long as economic conditions are favorable and dairy product sales remain brisk, no major downturns in prices are expected," he says.