Dairy markets could not escape price volatility in 2013 and likely will see it again in 2014. So what can a producer do to protect profit margins and look to have a solid risk management strategy. Following the USDA November Production and Supply and Demand report I got to spend some time with a couple of well respected commodity brokers during the NAFB Trade Talk session. We talked about the fact that the USDA feels milk production will stay flat for the rest of this year but then pick up with cheaper feed prices in 2014.
Brian Doherty from Stewart Peterson told me that now is not the time for dairy producers to be complacent especially with lower priced corn. However Joe Barker of CHS was quick to add that with an uncertain future a fence position is a marketing position he recommends.
Also Dr. Bob Cropp, the well respected dairy economist feels dairy prices will drop following the holiday demand. How far they will fall however will hinge on both production and exports. At the present time production is expected to run ahead of 2013 levels but so too are exports. That is why a fence position looks to be a good position to take. Cropp concludes his outlook by saying the he is not that optimistic about the 2014 class 3 market, with prices settling in the high $16 dollar range for the first half of the year and only the low $17 dollars for the second half. So again, having some form of risk management plan may help to keep profit margins higher in what will again be a year of price challenges.