And prices are likely to be lower in 2023 while remaining at relatively high levels compared with 2021, says Robert Cropp, professor emeritus with University of Wisconsin Cooperative Extension, UW-Madison.
“Profit varies so much from one dairy farmer to another,” Cropp said, when asked whether most Wisconsin dairy farmers will be able to make a profit. “Overall, there was profit made in 2021 with some higher milk prices. But much higher feed costs and the cost of most all inputs that dairy farmers purchase wiped out a lot of higher milk prices.
“With 2022 milk prices (per hundredweight) averaging more than $4 (more) in 2022 than 2021, profits have improved in 2022,” Cropp said. “But dairy farmers continue to experience high feed prices and other input costs, reducing the level of profit.”
Cropp said the Wisconsin average all-milk price for August 2022 — the most recent month for which figures are available — was $22.10 per hundredweight, up from $17.70 in August 2021.
He thinks the average price for calendar year 2022 could be $24.50 per hundredweight, up from $19.49 for calendar year 2021.
“Reasons for much higher milk prices in 2022 are, one, U.S. milk production ran below year-ago levels from January through June and will end up slightly above 2021, about a 0.1% increase,” Cropp said. “And two, strong exports, particularly of cheese, whey products and butter.”
Milk prices have slipped in the past few months because of slightly higher milk production, and inflation and a slowing economy that have dampened domestic demand, Cropp said. But milk prices are expected to recover some for the months of October, November and December. “The reason is that butter and cheese prices are expected to increase as sales of butter and cheese are strong over the holidays,” he said.
“Milk prices are expected to average lower in 2023, perhaps between $1 and $2 (per hundredweight),” Cropp said. Reasons for that include, he said, “Higher milk production but not a strong increase, as dairy farmers face high feed and other input prices, labor shortages and fewer available dairy replacements. As of now, milk production is forecasted to increase about 1% over this year.”
Another reason, Cropp said, is “a slowing economy and inflation slowing down any growth in dairy product consumption” in 2023. “But forecasting milk prices far into the future is very difficult because milk prices are very sensitive to the final level of milk production, sales of dairy products and dairy exports,” he said.