Room for growth in dairy futures

A dairy economist says farmers are trying to take advantage of improving dairy prices but it could be a few months before any major herd changes can be made.

Nate Donnay with INTL-FCStone says weekly slaughter totals indicate dairy farmers are trying to expand milk production.

“But it doesn’t just flip on a coin and it’s easier to cut production that it is to add production back in.”

He says that lag in production and potential for more support in cheese markets should mean profitable prices for the next few months.

“The futures are factoring in an incredible collapse in spot cheese and I don’t disagree, but I’m not sure it can fall as fast as the nearby futures are pricing in.”

Donnay says he’s also closely watching commercial demand and if there will be a second-round government purchases for the food box program.

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