Dairy market is in for a bust after a 2014 boom

The dairy industry posted record high milk sales last year but plummeting prices is sending chills down the spine of dairy farmers of an upcoming dairy bust.

Milk is being overproduced and analysts believe that milk prices will take a nosedive in 2015. Shoppers can expect to save money in the dairy aisle, but farmers will be paying the price.

Michael Kleinhenz, of Madison, Wisconsin, told the Associated Press:

“I guess I’m sorry if I’m hurting the farmer or the middleman, but I’m certainly delighted to pay under $3 a gallon,”

According to Mark Stephenson, director of dairy policy analysis at the University of Wisconsin, farmers recognize the volatility in the milk industry. Only less than a year ago farmers were having trouble meeting a surge in demand as milk prices increased to record highs – at $25 per hundredweight.

As a result a lot of farmers invested in buying new equipment and expanding their herds to meet increasing demand. However, after Russia imposed sanctions against the US and China pulled back on its dairy imports, American farmers had a surplus, according to Stephenson.

Wisconsin and California supply the most milk in the United States. The milk glut reached its peak over the holidays and cooperatives asked farms to pour out a lot of their milk.

“It’s something that no farmer likes to do … it doesn’t feel good to just dump it out,” New York-based Northeast Dairy Producers Association board director Jon Greenwood said.

When there is an excess of milk then the prices of milk, butter, and milk powder drop. Market predictions expect milk prices to drop through spring – at about $13.50 per hundredweight in March.

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