North: Markets Look Good for Dairy
Published: Friday, February 7, 2025
Featured speaker Mike North of EverAg gave an overview of the future of dairy, grains and farm economy last Tuesday at the Indiana Dairy Forum in French Lick, Ind.
The Wisconsin dairy market risk analyst began the discussion with beef.
Cattle markets have been good, with even day-old calves selling for high prices.
"As we talk about beef markets, records (are) strong, great opportunities. And as we look forward, there's going to be some more to talk about here. Animal inventory is supportive. What got us here isn't just because people decided they were going to eat more meat. What got us here is a series of events," he said.
This series included COVID, drought in the West, higher numbers of cattle going to the feedlot, high feed costs and lower breeding numbers.
"Everything got kind of worked together to ultimately produce fewer beef animals."
With rising feed costs and struggling beef animal numbers, fewer replacement heifers were raised due to unpredictable milk prices. However, this has created a demand for both beef and dairy.
"All of this is bringing people by way of sexed semen on both the beef and dairy sides to a place where they could commit to getting more involved in this space. Here's the good news: these great prices aren't going to leave us tomorrow," North said. "The cycle is building on itself."
However, he warned dairy producers to beware of the 10-year cycle.
"Markets work. And as we talk about high prices, it will attract what's necessary to drive them away," he added.
Another suppressant of milk supply is the Highly Pathogenic Avian Influenza (HPAI) making its way through several states. HPAI has been confirmed in 16 states, with a presence in 735 herds in California, 64 in Colorado, 35 in Idaho, 30 in Michigan, 27 in Texas, 13 each in Iowa and Utah, nine each in Minnesota and New Mexico, seven in South Dakota, five in Nevada, four in Kansas, two in Oklahoma, and one each in North Carolina, Ohio, and Wyoming.
All this leads to the new FMMO.
"Milk has been kind of tight. (That's) more good news for the dairy," North said.
The order reform process was recently completed and is set to be implemented on June 1.
The five major changes North noted are: make allowance, removing barrels from the calculations in cheese, increasing solids in skim milk, adjusting the Class I mover and adjustments in the Class I order.
"In this particular order, this will impact you by about $1.70," he said concerning Class I.
Make allowance accounts for the cost it takes to make a product.
"That will have a negative impact on the class pricing that you see in the formula," he said.
The class one mover will not be calculated by the average of class III and class IV plus 74 cents but will return to the higher of those two figures. However, there is an exception for some products.
"That one was aimed very largely at the discussion around the negative PPD storing," he said.
"There's value to your market in a market that works. We don't need the government to tell us what your milk is absolutely worth," he said.
The federal orders give a baseline which accounts for the minimum possible price.
Due to inflation, frozen pizza buys have increased across the U.S., lifting the cheese prices. At the same time, cheese exports boomed recently, resulting in 12 new cheese plants nationwide.
"As you look at stocks, on almost every front across every product, we are at levels of inventory we haven't seen in over a decade and, in some cases, multiple decades. We're going to need more production to service the demand. And the demand is strong," North said.
He also said U.S. milk prices have been high globally.
"We expect milk production to grow. We expect older plants to be shuttered," he said. "Things are going to change. Whey availability will open up in the future. Whey is already starting to soften."
He also discussed the impact social media has on the milk market, such as the Cottage cheese trend, which has sent many Americans to the store to try various cottage cheese recipes, bringing up the cheese market.
With a new U.S. president, people are asking questions about trade, immigration and tariffs.
North said he expects Trump to go after these topics aggressively and creatively.
"I want you to notice what happened in 2020, and then '21, and then '22!" he said concerning the trade war with China. "We saw Chinese trade go to levels we've never seen before. Here's the fun fact: they only finished complying with 58% of the Phase One portion of the deal."
He expects the tariffs to eventually work out for the profit of U.S. agriculture.
North said the next big question is what will happen with Mexico. This is big for dairy farmers because Mexico is the No. 1 buyer of U.S. milk exports. He also discussed energy production, consumer trends, and corn and soybean projections.
North ended with a challenge to dairy producers: "We have strong margins. How are you handling it? Should we just sit idly? We are looking at some of the best opportunities in history."
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