There are already eerie signs that 2014 and 2022 might have a lot in common. In 2014, Russia and Ukraine were embroiled in a crisis that many feared would lead to another Cold War. There was a massive virus outbreak (ebola) that killed thousands with responses labeled “slow and uneven” and “lethally inadequate” (citing James Lindsay’s 2014 blog found here). 2014 saw wild fluctuations in gas prices—moving inversely to 2022’s move from $100 a barrel to $40. And 2014 was a record year for milk prices, proving a surprise after enjoying a stable and lower cost of goods in 2013.
In addition to these other parallels, we are already seeing similar trends in milk prices which, as it stands today, could very well reach the record price levels of 2014.
To see if these similarities might come to fruition, we look back and review key dairy pricing trends in 2013 and 2014 and compare them to what has happened in 2021 and 2022.
Dairy Pricing Trends
Annual CME averages for spot cheese block and barrel prices haven’t surpassed $2/lb. since 2014. Eight years ago, nonfat dry milk (NFDM) prices averaged close to $1.65/lb. The Dairy Market News Central whey price was $0.62.5 per pound. Since then, cheese and powder prices have not returned to 2014 levels. Butter prices, however, remained above $2 per pound until the onset of the pandemic.
In the first three weeks of this year, futures markets forecast 2022 butter and cheese prices would average above $2 per pound and NFDM and whey prices would average above $1.70 and $0.70 per pound, respectively.
Additional pricing and comparisons include:
- The butter market in 2013 ($1.55.bs.) and 2021 (1.74 lb.) were stable and priced below the average five-year trend.
- U.S. CME butter was slow to rise early in 2014 but eventually averaged over $2.16 per pound. For the year, it was peaking in September at an average price of $2.97.
- Milk production in 2013 was lower than the previous five-year average. The same could be said of 2021 milk production.
- U.S. CME butter set a record price for June in 2014 ($2.97). In 2022, the U.S. CME butter market set a record average price for January ($2.72).
While we are seeing considerable parallels with eight years ago, we’re still early in the year. But we do know that, due to many factors, milk production is below the levels of 2021. We’ve seen that so far, fewer cows are being milked in 2022 than in 2021. Demand the rest of the year could adjust all of this. MRV will continue to monitor these supply and demand dynamics and share their impacts on pricing.
— MRV Dairy Solutions