What will 2021 bring? A somewhat candid reflection.

By Katelyn Walley-Stoll, Farm Business Management Specialist, Cornell Cooperative Extension

Usually, I reserve the January issue of Dairy Market Watch for a thoughtful reflection on the previous year's milk market. I discuss the highs, the lows, the seasonal changes, and the subtle nuisances that accompany such a complex marketing and price system. Then, I try to summarize predictions of what the new year will bring, tying together thoughtful projections and carefully calculated forecasts done by industry experts who have a whole lot more wisdom and experience than I do.

However, as I sit down to gather all of the information for this month's Dairy Market Watch, I have to say this is a much different, and less articulate, reflection than I'd normally have… My summary for 2020: What the heck. And my carefully summarized prediction for 2021: I dunno.

I think that 2020 has taught us all that our predictions and expectations can very quickly be thrown out the window, even on a worldwide milk market scale. There are several things that will come into play through this new year.

We've already seen government initiatives that provide dairy product purchases support milk prices, and these could continue with new rounds in the coming months under a new administration. We at least know that the current Farms to Families Food Box Program will run through April, along with Section 32 product purchases, and the $400 million Dairy Donation Program. We've also seen strong household purchases of dairy products as people continue to cook at home and eat comfort foods (I know our house has had a steady rotation of milk and cereal, pizza, mac and cheese, and ice cream). We can also expect a big surge of restaurant and wholesale purchases later in the year when things open again.

However, milk production continues to run higher than expected. December milk production was 3.1% higher than a year ago with 1.1% more cows. Dairy stocks are also building, which will create less demand from buyers. As Bob Cropp highlighted in his January 2021 Dairy Situation and Outlook, December 31st butter stocks were 44.4% higher than a year ago along with a 5.7% increase in total cheese stocks. This higher supply and lower demand is affecting cheese and butter prices negatively, and could continue to do so throughout 2021. Dairy sales, both domestic and international, will remain lower than "normal" for as long as the world contends with COVID-19.

Then there is the question of what effects the COVID-19 pandemic will continue to have as we experience another major spike across the country and face the challenge of new strains and a taxed healthcare system. The worldwide recession that we're just beginning to understand will not be easy to come back from.

So - what will 2021 bring? USDA has forecasted Class III to average $16.90, compared to $18.25 last year, and Class IV to average $14.10, compared to $13.48 last year. While some industry experts are forecasting higher (Class III in the mid $17's and Class IV in the mid $16's), I think it's safe to say that we'll just have to wait and see how markets are able to recover from an unprecedented pandemic. 

A Note: Huge kudos and thanks to my colleague and our team's Dairy Management Specialist, Alycia Drwencke, for covering Dairy Market Watch over the past few months. I appreciate her effort and willingness to jump right in while I was out on maternity leave! In September, our family welcomed baby #4, which has been a bright ray of sunshine and hope in such dark and uncertain times. I hope you and your family are safe and healthy as we start our new year!