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Dairy producers’ margins expected to tighten in 2023

The strong dairy product prices and export volumes seen in 2022 are expected to temper next year, tightening margins for US dairy producers.

Economist Tanner Ehmke with CoBank tells Brownfield there has been gradual growth in global milk supplies in response to record high milk prices.

“You have extraordinarily high feed costs and replacement heifer costs are record high and so that’s really going to temper our ability to recover in milk production here in the US going into 2023. So we think that there is going to be some fairly strong support underneath milk prices.”

However, those elevated feed and input costs will also dig into profitability.

Ehmke says US producers have the advantage heading into next year. “Considering that they are going to have more working capital because of the income that they made this year from high commodity prices. I’d be cautious going in 2023 make sure you don’t spend down that that working capital, you have to maintain that budget as margins erode.”

He says the strengthening US dollar is a continuous headwind for exports especially to China, the top importer of global dairy products.  Further analysis is outlined in CoBank’s 2023 Year Ahead Report.