If grain prices keep going up,
what impact will it have on milk prices?

Grain prices have seen an incredible run higher since July of 2010. While statistically there is a positive correlation between milk and grain prices, the relationship is fairly weak and not nearly strong enough to conclude that if grain prices stay strong that milk also must remain at higher levels. The opposite also is true – if grain prices move lower, it does not mean that milk also must go down. Both of these markets have their own fundamental reasons to move higher or lower.

Think back to 2009 when milk was historically low but grain prices very strong. For some producers the milk check hardly covered the feed bill! Consequently, we work to establish dynamic strategies for both milk and inputs – corn, meal or other proteins, fuel and interest rates, always looking for the best price the market will offer on both sides of the equation. If you are not prepared to take advantage of the best opportunities in each market, you can’t make up for the times when the profit margin is too slim for comfort, or even negative.

So, rather than make assumptions about where the market might go, be prepared for the opportunities or risks provided by each market so you can achieve the best bottom line position.