Much lower milk prices compared to 2014’s record highs made the past year drastically different than 2014. It looks like 2016 is going to be much closer to 2015 than 2014. Many of the same market conditions that forced milk prices lower remain in place in early 2016. Any significant relief is likely much later in the year.
Many of the reasons for lower milk prices are trade related. Over the last decade or two, as U.S. domestic milk production and world economies grew, the U.S. dairy industry has become more dependent on exports and trade. The U.S. has exported the equivalent of 15 percent or more of our milk production in some months.
Reduced demand for milk products from China and Russia has cut world demand, while increased production from major exporters like New Zealand, the EU, and the U.S. has left a glut of milk on the world market. High product prices in the U.S. relative to world market prices, have boosted our imports and reduced our exports.