Domestic Production at Record Levels, Some Gets Dumped: Milk Futures

Domestic milk output is said to be set at the highest ever for the fifth straight year, but now some dairies are reportedly not able to find buyers because milk is so abundant. Raw milk supplies are reportedly over capacity at processing plants in some parts of the country, and although demand is said to be improving, the US milk production is contributing to an existing global surplus.

The USDA stated last month domestic milk output in May reached 18.4B pounds – the most in any month – and is on pace to reach a record 208.7B pounds this year. Contrast this to the global milk production said to be rising 2.1% to a record amount of 582.5M tons (with New Zealand being the top milk exporting nation).

Nicholas Medina, a futures and options specialist for Capital Trading Group in Chicago, shares his view regarding the fundamental assessment of the milk futures markets by stating, Normally there are destinations in the Midwest where milk can find a home at a reduced price.” Medina added,Evidently those processing plants are at full capacity already and the milk wouldn’t even be a perishable product by the time they got around to processing it.”

Milk prices have been going up steadily for the past five years due to reasons such as drought and (formerly) high feed-grain prices. Now we learn some of our nation’s milk is going to spoil because there’s so much produced – well that cost in and of itself may be contributing to the current high price as well.

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