Dead Cat Bounce or Cautious Optimism?

Dr. Mark Stephenson called it the ‘dead cat bounce’ in his podcast at dairymarkets.org with Wisconsin dairy economist Bob Cropp a few weeks ago. In early March, however, the milk market hinted at nine lives.

While the All-Milk price for January dropped to $17.60/cwt, the lowest since July 2012, the picture looks better than it did two months ago. February’s All-Milk price will be higher than January’s, and dairy economists expect a rebound later this year. Underpinning the dairy market is the long-lived high market for cull dairy cows and bull calves, which according to slaughter counts in recent weeks have prompted some culling. The U.S. total cattle herd remains historically low, even though both beef and dairy herds did some rebuilding last year.

The 50% drop in global dairy product prices during the last half of 2014 pushed prices lower but the Global Dairy Trade (GDT) biweekly auction has recovered half of that loss by advancing in the past three consecutive sessions for a cumulative gain of 26% since mid-January.

The CME spot cash and futures markets in Chicago reflect a bit of cautious optimism. While U.S. dairy product prices are certainly lower than last year, and they are lower than the uptrending global prices, they are not as low as previously forecast.

China is back on the global market for milk powder but the buying is tempered by getting its own dairies up to speed. New Zealand’s seasonal production is being cut short by drought. California’s production is falling in the face of lower profit margins and drought. The U.S. dairy industry is marketing value-added instead of building commodity inventories.

Meanwhile, the continued slide in fluid milk sales, and the reported balancing issues in the Northeast are reducing the region’s blend price and premiums and spurring new fees ahead of Spring flush.

Work with your ABI nutritionist to optimize your milk margin over feed cost to position your dairy for the future.