Key Takeaways:
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Milk production is strong, and component production is even stronger, resulting in abundant product output. With favorable margins and low feed costs, production is likely to continue climbing in the near term. While demand, particularly for cheese, has helped support prices, expanded processing capacity and increased output could eventually pressure the market, especially if the international price gap narrows. The market remains sensitive to shifts in global demand, and any slowdown in exports could quickly weigh on prices.
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The August WASDE report was extremely bearish for corn, with higher acreage and huge yield projections pointing to a potentially MASSIVE US corn crop. New-crop corn futures fell to contract lows, and if the balance sheet plays out as forecast, prices could remain under pressure. In the soybean complex, US-China trade talks resulted in an agreement extension; however, there is no guarantee China will purchase the volume of soybeans needed to meaningfully impact demand. With feed markets soft and supply prospects strong, it is an opportune time for producers to consider locking in feed needs.
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While milk prices face potential headwinds, falling feed costs are setting the stage for excellent margins if current projections hold. Strong cattle markets are also adding support to dairy farm income, with beef-on-dairy calves continuing to command high prices. Given the volatility of today’s markets, it is important to capitalize on these favorable conditions while they last. We continue to encourage producers to secure positions on milk, feed, and cattle while margins remain historically strong.
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