Dairy markets have been a bit of a roller coaster lately but they’re picking back up. That’s according to Leonard Polzin, UW-Extension Dairy Markets and Policy specialist. He says consumers are still purchasing dairy products and he expects margins to rise back up. Polzin gives a recap of 2022 and explains what he’s forecasting for 2023 dairy markets.
“2022 was a year of highs as we had record high milk prices but we also had really high feed prices,” says Polzin. “So while the income coming in was high, so were the expenses going back out. But with that, margins still were quite good, relatively speaking.”
He adds that 2022 gave a bit of a reprieve for producers to be able to catch up on some things, maybe make some new investments, and come into 2023 with a little cushion. As we come into 2023, costs have decreased, but not enough to get the margins back to where they used to be, at plus nine or ten dollar margins.
As the rest of the year continues, the dairy markets will be influenced by what is happening on the domestic consumer side. Polzin says a big part of that discussion is also about monetary policy and figuring out how much money is left over right for people to be able to spend on dairy products.
“If you calculate the percent of milk solids, meaning if you take the milk fat and milk protein, turn that into solids, and then see where that’s being utilized, it’s about 16 and a half percent of our milk solids being exported right now,” says Polzin. “So what that means is that we have to clear a little over 16 percent of our production in the international market and remain competitive on price on whatever product we’re selling.”
He adds that in 2022, we saw a strong dollar and there were not a lot of other products in the market from other countries. As we move forward from last year, the dollar has softened and exports have pulled back, but he doesn’t see large amounts of reservation at the moment.
“I think producers nowadays are getting more sophisticated, involved and increasingly better managers every single year. So I think as people become better and better operators, they’re looking for more information and seeing what influences their operation and how they can use that in decisions on their farms.”
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