Milk Cost of Production Estimates for July, August, and September 2016

Milk prices for Connecticut farmers rebounded to $16.66/cwt in the third quarter of 2016, the highest monthly average price since the fourth quarter of 2015. A dumping policy available to producers under the Northeast region’s federal milk marketing order helped somewhat with these prices during the first half of the quarter. At the same time, the monthly average cost of production increased by $2.24/cwt, to $34.25/cwt. Over 40% of the increase in cost of production ($0.93/cwt) can be attributed to an increase in the cost of purchased feed per hundredweight of milk. The monthly average shortfall of prices minus the minimum sustainable cost was $11.42/cwt, similar to the shortfall in the second quarter. Thus, we see a need for continuing payments in the future to Connecticut dairy farmers under Public Act 09-229. Looking ahead, national milk prices are expected to remain low; national milk production in August was 1.9 percent higher than in August 2015. Feed prices are expected to remain fairly stable. Taking these factors together, we can expect that the minimum sustainable cost of milk production will continue to exceed the price of milk, and that Connecticut dairy farmers would face additional financial pressure in the absence of payments under Public Act 09-229. Length: 1 page