Contributed by Megan L Roberts
Compared to other livestock commodity futures, milk futures rebounded somewhat faster than expected from the COVID-19 price dive in late March and April. Cautious optimism began to creep into the dairy market as milk futures rose through May and June. Of course, mailbox prices do not equal futures prices.
As we continue to move through the uncharted territory of COVID-19, lower-than-expected mailbox price is yet another shock dairy farmers face, even as other parts of the dairy industry recover. To better understand mailbox prices and how they differ from futures prices, let’s dig into dairy’s complex pricing mechanisms: federal milk marketing orders (FMMOs), producer price differentials (PPDs) and pooling, and cooperative pricing.
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