Dairy markets are on a roller coaster. Limit up days last week for milk and large increases in butter and cheese markets all reflect surprising changes in demand.
John Heinberg of Total Farm Marketing says there is a combination of factors contributing to the market swings.
“Yeah, this market is on fire right now and realistically, it’s becoming a demand story. With obviously prices where they were, now with COVID-19 maybe moving a little bit more to the back burner, we’re starting to see some of the retail demand, bulk buyers stepping in, as well as the retail/food service/restaurant trade starting to get a little more active. And then beyond that, the export side of the equation is also warming up here very quickly.”
However, as quick as the markets go up, they can right back down. So, Heinberg says farmers need to take advantage of the opportunity.
“We we’re talking doom and gloom here just the middle of April and we now we got a total flipside. Still not back where we were in January or February, but enough to the point that there is some value out there. Let’s look at those different strategies that keep a floor underneath this market, but still keep the top side open. Talk to your market advisors, insurance groups, take a look at the DRP program. If you don’t want to mess with the DRP, then let’s talk puts, there are things of that nature. Or, if you are making sales, find a way to keep that top side open because things can get explosive in the milk market and we’re seeing that right now.”
Most importantly, he says, be ready for market changes.
“COVID-19 is still here, what if things happen back in the fall, all of sudden kids are back out of school, we don’t start in September like we think we are. That’s going to really cause some demand issues. So, producers got to be ready and make sure you got something in place in these windows when you get these opportunities that you just didn’t think were going to be here three weeks ago.”