The KDM Dairy Report 05/03/2019

Weekly dairy cow slaughter numbers totaled 61,000 head, up 2% vs. a year ago, but there seems to be a tapering off after seeing seven consecutive weeks at 70k+ earlier this year. We’ll need to watch the milk cows number in future Milk Production Reports to see if the decline is tapering, especially considering the higher milk prices out there now will be encouragement enough for some to hang on. Dairy Market News updates this week continue to paint a picture of improving milk production over much of the country, but at flush levels below prior years, and nothing that seems will stress processing capacity. Spot milk prices are still not being steeply discounted as has happened the prior 2-3 years, with some loads even being priced at a premium. Cheese inventories are building slightly with the improved milk output, but cheese demand is good, especially in the East. NDM updates this week leaned bullish, with some talk of  prices heading into the $1.10s. Futures prices are already headed in that direction. Dry whey continues to languish on weak demand, but most of the info related to the swine flu virus is already baked in to the market and prices have stabilized. Spot dry whey actually gained 2 cents this week. With the decline in dry whey output, the market might be putting itself in better balance. There was a lot of trade talk this week in Washington, with hopes that a deal with China would be done within two weeks. We’ll wait to see it actually happen, but it could be a helpful development to the Ag markets. Very wet weather is hitting much of the grain belt, with the potential for further delays in planting. Watch corn prices as some of those acres may end up going to beans or left vacant. Finally, encouraging economic statistics were released this week, pushing the stock market higher. With an economy that appears to be strong and the lowest unemployment since 1969, consumers may be encouraged to open their pocketbooks further at restaurants and food service outlets. Technically, the market is overbought and due for a correction, but that doesn’t mean it won’t keep going higher. However, producers should begin to ask themselves how high is realistic? We’re already pricing $1.78 this fall. Are we headed to $1.90? $2.00? Higher? For those that have little to nothing hedged, perhaps prices north of $17.50 Class III should be a starting point to either sell or buy PUT options. Don’t wait until it’s too late! Have a great weekend!