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Optimism for improved dairy prices hindered by rising expenses
A dairy analyst says inflationary pressures are limiting producer profits and expansions even as prices have improved somewhat.
Ben Laine with Rabobank tells Brownfield costs remain high for feed, labor, energy, and much more on farms.
“Right now we’re seeing milk prices come up, that’s certainly a welcomed change, but it’s not without some pressure still on the cost side,” he says.
He says milk powder prices globally are rising to levels not seen since 2014 as U.S. and European milk production faces cost pressure and others are limited by weather.
“That’s always the high watermark that we always look at in terms of when can we get back to those kinds of milk prices,” he says.
But cost structures are different today according to Laine which has limited profitability. In 2015, he says prices turned around rapidly after the EU lifted production quotas.
“That levers not there this year so I think that could add a little bit more lasting upward pressure on prices than we saw in 2014, we could be up here at these levels for a little longer,” he explains.
Laine says dairy farmers are also less motivated to expand production with higher construction costs and cooperative base price programs which will likely support prices into 2022.
