Since the record highs of 2014, when milk was priced at well above 25 dollars per cwt, U.S. milk production has continued to grow at record numbers, and the USDA has projected that a record 212 billion pounds of milk will be produced in the U.S. in 2016. The demand, however, has begun to slow, and this new dynamic of supply and demand changes have combined to create some serious pressures on milk prices worldwide.

Dr. John Newton, a senior economist with the National Milk Producers Federation (NMPF), sat down with AgWired for an interview on the current state of milk prices, what’s behind their decline, and what the change in prices means for producers nationwide.

Dr. Newton explained how the Russian ban on EU cheese imports has created a reallocation of dairy trade, especially on the cheese end, and how the slowdown of dairy purchases from China, along with the sustained boom in global production, have been major contributors to the slowdown in demand for U.S. dairy, creating the steep decline in prices that once were hitting record highs.

“Dairy farmers milk prices are determined on a survey of cheddar cheese prices, butter prices, nonfat dry milk prices, and dry whey prices. And the two powders, the nonfat dry milk and the dry whey, have come down quite a bit from where they were in 2014, and that’s really where the weakness in dairy farmer milk prices has come from,” he said. “But on the butter and cheese side, the strong domestic demand for milk fats has been very robust, and that’s actually helped U.S. farmers have a higher milk price than farmers in the EU and New Zealand.”

From the consumer perspective, retail prices for milk and dairy products should begin to drop as a result of the global decline in milk prices, though Newton is not yet sure how much they will actually drop. This could help demand, however, by making milk and dairy products more price-competitive with the non-dairy beverages made from coconuts, almonds, and soybeans that have begun to increase in popularity among the American consumer base.

Listen to my full interview with Dr. Newton here:
Interview with Dr. John Newton, NMPF