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Broker says herd size, productivity, and stocks a big part of Thursday dairy price drop

A broker and risk management expert says several factors played into Thursday’s big drop in dairy prices.  Mike North is with Commodities Risk Management Group and says, “As we look at butter, cold storage numbers were up 24% from the week prior.  That’s huge.  Milk production up 1.8% year-over-year for the month of January, and probably the biggest number of all of them, the very fact that despite all of the chatter, despite all of the coffee shop rumors, milk cow numbers rose.”

North says buyers don’t feel any pressure to buy right now.  “If I’m a buyer of product, the last thing that I’m doing as I head towards the spring flush and tons of milk and a lot more product going into inventory is chasing prices.”

And, with buyers holding back, prices fell including the near term milk futures which dropped more than thirty cents.

North says about 78-thousand more cows in the last ten years plus better production per cow is also part of the milk glut.  “The growth in productivity per-cow is the equivalent of adding about 75-thousand cows to the herd based on 2008 production numbers.”

North says the weaker dollar has helped exports, but not enough to overcome the supply issue.

His advice to producers is to be vigilant and prudent, but not over-reactive in the market, and if in doubt, seek risk management advice from a professional.  When it comes to the markets, North says every day is an opportunity and producers need to bring a strategy to the table.

Mike North discusses the dairy markets with Brownfield’s Larry Lee: