Five Factors To Watch The Next Six Months

We start the second half of 2024 in a different place than we were earlier this year. Milk prices are heading up instead of down, and that alone brings some optimism. Of course, there are many factors that play into milk prices and farm profitability, and a lot can change between now and the end of December. During a Center for Dairy Excellence “Protecting your profits” webinar, Ever.Ag’s Kathleen Noble Wolfley shared her five areas to watch for the second half of 2024.

Exports: Noble Wolfley pointed to the record-breaking cheese exports that kicked off 2024. February, March, and April cheese exports all hit record highs, and year-to-date, cheese shipments were up 75 million pounds from the year before. “That’s big volume,” she emphasized.

Low prices compared to our international competitors helped us win in that regard, she noted. “Consumers across the rest of the world are price sensitive, just like we are in the United States,” she said. Cheese prices have been moving upward, which affects how competitive the United States is on that global market, and we could start to see some pushback, Noble Wolfley explained.

Domestic demand: “Domestic demand is looking better than it had been,” Noble Wolfley shared. In 2023, U.S. consumers did not seem all that eager to go out to eat or make a lot of purchases, but the tide shifted in the first half of 2024. Promotional activity has been aggressive the last few months, she noted, and we don’t have a lot of excess cheese because people are buying more. Restaurant traffic has also been rising. “Any little bit of increased demand is going to help on the dairy side of things, and increased restaurant traffic is definitely helping,” she said.

Milk production: Reduced milk output has been a storyline of 2024, and a shrinking cow herd is to blame. “We don’t have a ton of cow power, and numbers are down year over year,” she said. The impacts of hot weather and highly pathogenic avian influenza (HPAI) are some other contributing factors. This is an area to watch, but for now, “Milk production is tight,” Noble Wolfley said.

Butterfat prices: Noble Wolfley said high butter demand and prices have benefited milk checks the past several years. Producers have responded to those prices by breeding for higher fat production, doing more crossbreeding, or transitioning to Jerseys. “Producers have responded to the incentives,” she noted. “The milk we are making today makes that much more product.”

Even though butter inventories are sitting at levels above a year ago, demand for the product and prices remain strong as we start the second half of this year.

The macro market: There is a lot of uncertainty in the macro market, Noble Wolfley shared. Upper income consumers seem to be doing okay, but people in the middle or lower income brackets are in a much different place, she noted. High credit card debt balances show that in general, “The consumer right now is pretty strained,” she said.

As for how these factors will affect milk prices the rest of the year, Noble Wolfley summarized, “If we keep exports moving, keep domestic demand up, and production falls behind, we could be setting ourselves up for a second half of the year that looks pretty good. On the flip side, if we start to lose exports, if those high prices cut back on promotional activity, or if milk production picks up, the opposite could be true, and we could be facing some downside.”

Hoards, July 2024