Analyst says record milk prices are an anomaly


Analyst says record milk prices are an anomaly

A risk management analyst says the dairy markets have gone from rock bottom to record highs because of cheese. 

Mike North with Commodity Risk Management Group tells Brownfield with blocks moved to $2.70 and barrels to over $2.32 a pound Monday, and he’s expecting Class Three milk to keep going up in the short term.  “As you start running the math on that, it suggests that July milk could in fact make a move towards 24 dollars.”

Class three prices for July and August moved up more than a dollar a hundredweight Monday on the first day of expanded trading limits at the Chicago Mercantile Exchange. 

North says it is unusual to have prices going up with so much cheese in cold storage.  “This is a very wild price environment and even with the fundamentals showing us lots of inventory, that availability of fresh, less than 30-day-old product has remained tight.”

North says the rock bottom milk and cheese prices of a few months ago have been boosted by purchases for the food box program within the Coronavirus Food Assistance Program, and prices will likely drop as quickly as they rose.  “It’s usually short-lived.  It’s usually very violent on the way up and equally or more violent on the way back down.”

He also says as Class Three manufacturing milk prices get out ahead of fluid milk, it’s possible producers will see some milk check deductions.

The CME is trading with additional expanded limits on cheese, whey, and Class Three milk starting today.

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