2023 was an unstable year for many in agriculture, especially those in the dairy industry and with a new year brings new expectations. Zach Bowers with ever Dawn ag reflects on the up and down nature of 2023 for dairy producers.
Looking back on it, I never in a million years would have guessed we would have seen that $14 class three that we did in that June July period, and then to follow it up with $19 Just a couple months later and then right back down there where we’re at. You’re looking at you know, 1530ish class three at the moment for January.
Dairy demands will play a big role in 2024 prices. But Bowers says the supply will dictate the direction of the markets as well.
The buy side continues to do its thing here. We’re seeing cow numbers dropped. We’re seeing the milk production report continue to run lower, not only here but actually globally as well. You’re up trending lower (at) the same time as they’re affected by poor margins and environmental regulations similar to us here in the US, but actually a little bit more extreme. Looking into 2024, supply side probably continues to stay tight and eventually that will catch up to us and I think will allow for better milk prices. The time being though, the next three to six months, hard to get really excited about this market.
Bowers admits it’s also hard to get excited about 2024 prices when you look at the cheese side of the industry.
The last couple of years all we’ve done is add more cheese production. These new billion dollar cheese plants to run efficiently have to always run full. So even with no production, tightening, there’s usually just ended up shorting the class for butter powder plants that continues to hold the 19 Plus our milk pricing the 2024 and I think can probably continue to be the shining star for the next year or so as tight milk production causes the lower production of those class for products. However, the cheese plants are going to continue to make their film and that means we need to rely on the export market.
The US has not competed well price wise on the world market but entering this year that’s changed, and the US has the most attractive price for world buyers.
Right now we’re the cheapest in the world on the cheese front at 145ish spot price, whereas you know New Zealand’s closer to 190. Europe’s also in that 180 to 190 price as well, too. So we shouldn’t be the first stop for export. The question is, if and when that happens, right. I mean, we continue to see Chinese economy downturn continuously their participation on the New Zealand GDP auction. You know this last auction this Tuesday, their participation was down 53% year over year. Eventually they will have to come step back into the market. Doesn’t look like it’s right now, and it doesn’t look like it’s going to be anytime soon, right. We’re going to continue to have to weather this for export market for a little bit longer.
Cow numbers continue to lessen. Bowers says another source of revenue for dairy farmers can be found in the dairy heifer market as replacements for the milking herd will be hard to find moving forward due to the increased beef on dairy breeding over recent years.
If you own extra replacements, you’re in a very good position right now to make decent profit on those, and I think that those prices will probably continue to remain pretty elevated into the new year as one of the shining stars of the agriculture industry. This past year has been the beef prices, right? I mean, we just haven’t had the beef cattle in the pipeline to keep up with demand. We saw that in the cold storage report last week with one of the lowest deep numbers in cold storage in I think three or four years. With that we’ve seen a lot of beef on dairy, right? And you’re seeing that in the deal bull cash right? I mean, they were anywhere from 500 to 600 bucks. I know they’ve come off maybe a little bit here in the last couple of weeks, but still a lot of guys getting 400 plus dollars for a deal. You’re gonna keep breeding in that right, which is only going to continue to keep that heifer pipeline pretty tight going into the new year.