Wisconsin Dairy Experts Look To International Demand To Raise Prices

Despite new tariffs on United States dairy products, some Wisconsin experts say international demand could help improve milk prices this year.

The Class III milk price — based on demand for cheese and butter — fell more than 7 percent in July as buyers waited to see how the market would react to new tariffs from Mexico, China and Canada.

But Bob Cropp, a professor at the University of Wisconsin-Madison, said international demand has held strong so far. The latest data from June shows overall dairy exports were up 4 percent from a year ago, with some categories like nonfat dry milk/skim milk powder up 24 percent from 2017.

Cropp said farmers can thank the drought currently affecting much of the European Union.

“They probably won’t export as much and even with the retaliatory tariffs, that means maybe we can fill some of those markets,” Cropp said.

Cropp said milk production has also been below-average in the U.S. thanks to dry conditions and more farmers leaving the business. Wisconsin has lost 382 farmers since the start of 2018, around 1 percent ahead of last year’s exit rate.

“If exports can hold and then milk production (growth) can stay below 1 percent, we’re going to see some strengthening in milk prices,” Cropp said.

But Cropp warns these conditions may not last long. He said the European Union has already struck new trade deals with Canada and Japan this year and is expected to improve trade relations with Mexico, all countries that are top buyers of U.S. dairy products.