The June 18, 2026, post to this site covered the volatility of producer prices. Diary milk production has always been a volatile business. When the milk came from small farms, life was always up and down as the price of crops, milk, eggs, etc. varied. Diary today has become a business with huge farms, technology, and automated facilities. Businesses that are volatile are difficult to manage and the volatility means ups and downs in production and managing volatile prices. Managing that volatility requires flexibility, which is costly.
The detail “digging deeper” in volatility will be analyzed in two posts. This post will provide detail in the volatility, and the second post will cover what is causing the volatility.
Butterfat prices per month (Chart I) have varied from highs reaching $3.71 per pound in late 2023 from $1.55 in 2021. That is a change of 139%. Currently, butterfat is worth $1.69 per pound, a drop of 55%.
Monthly revenue per cow when combined with butterfat, protein and Other Solids has jumped from $307 to $577 per month per cow, a difference of 53%. The numbers in Chart IV are based on averages of the Federal Order monthly pricing, the actual monthly percent of components, and the actual milk per cow.
This will be broken down in Part II to pinpoint the source of the volatility.
The volatility covered above is so big that survival is difficult unless funds are available to get through the low points. For that reason, many small dairy farms will close, and others will minimize investments in improvements. The retail prices for dairy products, as covered in another post does not have this volatility. If it did, buyers of dairy products would most likely minimize purchases. With expensive facilities for modern milk farming, who would want to make the investment?
Part II of this “digging deeper” analysis will post next week. It will identify the elements creating this volatility. Is the USDA structure for paying for milk out of date. Yes, the system is built on capitalism, but the payment structure does not provide for a productive environment.
