Rabo Research Calls for Healthy Dairy Margins Ahead

An ag economist says he’s optimistic strong dairy prices will continue through the end of the year and into 2025.

RaboResearch’s Lucas Fuess says, “We expect both higher milk prices and feed costs to be around their lowest levels in four or five years, so when we take a combination of those two factors, we’re looking at some of the healthiest margins we’ve seen in quite some time.”

USDA recently set its base Class III milk price for September at $23.34 per hundredweight, the highest since June 2022. 

Fuess says continued tight milk supplies for more than a year along with decent domestic and international demand are major factors.

“It’s really rare for the U.S. to go this long with weaker milk production versus the prior year,” he says. “We’re usually the place in the world that’s growing our milk output, so this stagnation has finally caught up to us.”

Fuess says strong components have made up for tightening milk supplies and processors have been able to make more dairy products with the higher protein and butterfat levels. He indicates next year milk production levels and prices could be in for a reset, but margins should still be profitable.  

EDITOR’S TAKE:

Great news for dairy farmers! Tight supply, strong demand (both domestically and internationally), lower feed costs, and lower interest rates all point to higher profit margins. This implies that dairy farmers will certainly be looking to lower their tax burden in 2024 and 2025. Put your inventory on AgTruckTrader.com® today. Also, make certain you communicate that you are a CAD member and what that implies. It might also be a great time to mention the new AgWagon as an option for those operations with special design and performance requirements.