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Dairy Prices Falling Due to Weak Demand in Pennsylvania
Pennsylvania Ag Connection - 09/15/2023

Milk production has grown slowly this year, with some states seeing year-over-year decreases. This is likely due to the fact that farmers are feeling the pinch of rising costs and shrinking milk checks.

On the positive side, cheese and butter production and consumption are strong. However, fluid milk consumption is continuing its decades long decline. This is likely due to the fact that consumers have many beverage options and may inaccurately believe that plant-based milk alternatives have the same nutrition as milk.

The market for nonfat dry milk depends on exports. When exports are falling, processors are not keen to make powder, as it takes time to get the product out the door and they may end up selling for a loss.

Whey is another dairy product that is seeing weak demand. This is likely due to the fact that sales of products that use whey, such as energy bars and fitness supplements, depend on a growing economy.

Cheese is an appealing export product because it has a high value and uses both fat and protein. However, the U.S. must be competitive to export cheese.

Exports will continue to be an important part of the U.S. dairy market, especially as processors expect foreign countries to consume marginal increases in American production. However, if exports cannot pick up all the difference, a little bit of extra milk will drive the price of milk lower.

The dairy market is also affected by the larger economy, which has been cooling in response to rising interest rates. The global slowdown is expected to bottom out next year.

Overall, the dairy market is in a challenging position due to weak demand and rising costs. However, there are some positive signs, such as strong cheese and butter production and consumption. It remains to be seen how the market will perform in the coming months and years.

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