Takeaway

The presenter argues that the typical fall rally in dairy prices is unlikely to materialize this year. High dairy product inventories are expected to cap any price upside from seasonal demand, while rising input costs for feed, labor, and fuel are simultaneously squeezing producer margins.

What the presenter said

• Milk prices have held steady in a low range, between the mid-16s and upper-17s. [00:23]
• A seasonal price rally, usually driven by holiday demand for butter, is in doubt this year due to high existing product inventories. [00:31]
• Rising costs for feed, labor, and fuel are the biggest expenses for farmers and are significantly impacting profit margins. [01:03]
• While the "beef on dairy" strategy remains a valuable tool, revenue is declining, with checks for day-old calves falling from a $4-$4.50/cwt range to the current $3-$4/cwt range. [01:42]

Trade ideas

• None stated. The presenter's market view is that the upside for dairy prices is limited this fall due to a combination of high inventories and rising input costs eroding profitability.

Levels and data cited

• Milk prices: Currently trading in the "mid-16 to upper-17 range".
• Beef on dairy calf prices: Have declined from a previous range of "$4 to $4.50 per hundredweight" to a current range of "$3 to $4 per hundredweight". This data was attributed to Mike North from Ever.Ag.

Risks and what would invalidate this

• High inventories of dairy products may prevent a fall price rally.
• Rising input costs (feed, labor, fuel) are eroding producer profit margins.
• A decline in prices for beef on dairy calves reduces an important alternative revenue stream.