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U.S. milk market on the rise, but for how long?

Alex Breitinger

U.S. milk futures are nearing a nine-month high, with prices approaching 17 cents per pound.

Cows are waiting to be milked at the milk parlor on the Clover View Dairy Farm Wednesday, Jan. 6. The workers can milk 16 cows at a time and the cows are milked three times a day.

For U.S. dairy farmers, low-cost corn and soybeans, along with high-value milk, present a golden opportunity, but trouble may be lurking around the corner.

Global dairy prices have fallen to an eight-month low, which could ultimately drain U.S. prices lower as low-cost dairy from foreign markets undercuts U.S. products.

The world’s largest dairy exporter is the island nation of New Zealand, which accounts for almost 20 percent of global sales. New Zealand has expanded its production in recent years, especially to meet rising demand from China, where consumer demands have shifted toward consuming more dairy.

U.S. dairy farmers would love to win more Chinese and other foreign business, as one-fifth of all U.S. farm income is derived from foreign trade, a figure that has been rising in recent years.

Buyers want soybeans

As U.S. farmers are finishing the soybean harvest this week, they were greeted with rising soybean prices, which neared $10 per bushel. Prices gained on hopes for more demand from China’s pork producers, who need soybeans to feed their increasing hog herds. Livestock demand in the United States is stronger as well, as U.S. hog and cattle numbers are near record levels.

Prices are also gaining as concerns mount about dry weather in Argentina, where farmers are planting. Argentina is one of the world’s largest soybean exporters, but bad weather there could hurt their upcoming crop, creating more demand for U.S. beans.

Alex Breitinger of Breitinger & Sons LLC, a commodity futures brokerage firm, can be reached at (800) 411-3888 or www.indianafutures.com.