Key Takeaways:
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Despite a tighter milk supply in the U.S. and abroad, dairy prices remain hindered by poor demand. Specifically, lackluster demand for cheese and NDM has kept prices from moving higher. However, if demand does improve incrementally, prices have the potential to rise rapidly.
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The IOFC outlook for dairy producers has tightened due to lower Class III values and slightly higher feed costs. Corn and soybean meal futures have risen compared to last month but are not currently poised to move much higher, limiting the strain on IOFC. Class III futures, however, have been the main driver of eroding margins, down nearly $1/cwt compared to a month ago. With Class III futures through July 2024 trading at or below $18/cwt, margins in cheese-centric markets may face pressure.
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Cow and heifer numbers are tighter than initially thought at the start of 2024. The smaller supply of dairy animals has caused replacement heifer values to rise. It will be difficult for milk production to grow much in 2024 due to limited cows available for expansion, and those for sale carry a hefty premium. Additionally, interest rates are higher than just a few years ago, squeezing margins and stymying growth.
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