Are Things Looking Up for Dairy in 2020?
Friday, July 24th, 2020 -- 10:03 AM
(Wisconsin Ag Connection) -Are things looking up for the dairy industry going into the second half of 2020?The answer is 'it depends,' according to Dan Basse of AgResource Company in Chicago. On Thursday's edition of the Professional Dairy Producers of Wisconsin's Dairy Signal, the agricultural economist explained that the industry is seeing a war among the milk marketing order classes. "Recently we've been seeing the Class III milk price climb to record levels because cheese demand is on fire, while Class I suffers because coffee shops are struggling," Basse explains. "Normally, it would be safe to say that this is great news for Wisconsin dairy farmers (who's milk mainly goes into cheese production), but now we're seeing the producers price differentials kicking in, which is taking up to $7 per hundredweight out of our milk checks." As the Class III price continues to rise, Basse says farmers should start seeing a bump in their milk checks by August. Earlier this month, the June Class III base price was announced at over $21 cwt. However, as cases of the coronavirus climb across the country, it could cause another hit to the consumers' demand for dairy products. "Prior to COVID-19, Americans were spending about 51 percent of their disposable income for food away from home, mostly at restaurants. That food service sector continues to be down by 27 percent compared to pre-COVID," he said.
"If the virus keeps spreading and more restaurants shut down, that could be devastating on our efforts to make an economic comeback." Basse hopes to see the federal government continue funding programs such as the Farmers for Families Foods Boxes. And he says it's imperative that the school lunch program resumes its purchases this fall, especially in elementary schools where students drink the most milk. Meanwhile, with the national unemployment rate still in the double digits and the expanded unemployment benefits likely to be reduced at the end of the month, it could spell more difficulties for dairy and meat demand from consumers, Basse said. "And China will also remain a factor. Unfortunately right now, there's no Phase 2 or Phase 3 trade deal in the works with the Chinese. What will happen when Phase 1 is complete?" On a more positive note, Basse says the meat packing industry has rebounded as of late and is near the levels they were a year ago. He also said the weather has been very cooperative for farmers, with crops looking excellent and dairy farmers seeing a bountiful supply of available forages to feed their animals.
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