2024 dairy returns might improve, By Scott Brown the University of Missouri

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Prices paid in 2024 for dairy products should be similar to 2023, while net returns may be better, according to University of Missouri Extension economist Scott Brown.

Brown told attendees at the 2024 Missouri Dairy Expo that average weather and feed costs will be key factors for this year’s outlook.

“The outlook hinges on demand,” said Brown. “Domestically, consumers may have less to spend on dairy, interest rates are higher, there’s less COVID financial help, and the economy is slower.”

On the supply side, milk production has been down for the past seven months relative to a year ago.

“Dairy is getting in a better place,” said Brown. “And the positive piece is, while not going a lot higher, things will be getting stronger.”

Dairy cow inventory has been lower since early 2023, Brown said. States that have experienced decline differ from the typical ones and include California, Colorado, and Texas, which had been growing.

Cheese prices have lower than many in the industry expected as demand has slowed. Lately, some recovery in cheese prices has provided some help to milk prices.

Global demand is also not growing as expected. Whole milk and skim milk powder sales to China are down as that country experiences a weaker economy amid a stronger U.S. dollar.

While Chinese imports have fallen flat, Mexico remains an important market for U.S. dairy farmers. Mexico is the largest importer of powdered milk products on a value basis.

Australia’s milk supply is expected to grow in 2024 as it recovers from drought. U.S. growth is expected to be one-half percent higher.

With the debate on the next farm bill unfolding, Brown foresees the most significant impact could result from the federal milk order hearing. Brown anticipates the Dairy Margin Coverage (DMC) program in the next farm bill will be similar to the one adopted in the 2018 farm bill but could allow producers to update their production history or increase the amount of production history eligible for a DMC payment.

He expects USDA to provide a proposed rule from the milk marketing order hearing sometime this year. He says there is the potential for large changes in how minimum milk prices are set through federal orders. Brown said some issues, like the Class I mover price, could be looked at in the next farm bill if not addressed through USDA’s federal order hearing process.

Missouri continues to lose dairy cow inventory, which Brown said will likely occur this year along with smaller herd sizes. He adds that the DMC has been helpful to Missouri dairy producers.