COVID-19 is impacting the entire economy and marketplace, including the milk market. We’ll be providing weekly updates with milk futures prices and other market updates to help keep you as knowledgeable as possible during this time. View the entire list of weekly updates.
This week showed more improvement in the average Class III and IV milk futures prices compared to last week. As of 2 p.m. on Friday, May 29, average Class III milk futures for the next 12 months was $16.30 per cwt, up $0.46 from $15.84 on Friday, May 22. Class IV average price was up $0.36 from last Friday to $14.82. Hopefully, this trend will continue, but it is worth looking at Dairy Revenue Protection as an option to lock in some protection in case this is only a temporary correction and milk price drops again.
Matt Gould, editor and analyst for The Dairy & Food Market Analyst, said on a May 26 conference call sponsored by the Center, that he believes the current increase in price has been the result of a temporary short milk supply caused by a few current factors that the government and dairy industry put into place once the COVID-19 pandemic began. The federal government is buying large amounts of dairy products under the Coronavirus Food Assistance Program (CFAP), retail sales are still growing, food service outlets are starting to buy more dairy to refill their supply line as more states begin opening their economies, and milk production has decreased as a result of milk marketers requesting or requiring dairy farmers to reduce production. What will happen once the government quits buying dairy products? Hopefully, retail sales will continue to grow, but Gould thinks it will take time for food service sales to bounce back to anything like they were prior to COVID-19 shutdown. Prior to COVID-19, more than half of all milk product sales came from food service. Contact Zach Myers if you would like assistance in understanding Dairy Revenue Protection.