Admittedly, high feed prices ate into net returns, but 1996 was not a disaster for the milk industry. Milk production in October and November limped along at about previous year levels. For the year production will be down slightly, even though 1996 was leap year. Most likely, the price plunge is an indication of what lies ahead with no government stocks to cushion against tight markets, and no market of last resort to guard against excessive commercial stock buildups. Cheese prices seem to be strengthening.
Production is unlikely to rebound in the face of current milk price levels.
Look for prices to begin rising through spring, moderate in summer, and rise again in the fall. This is a conservative forecast, yet is still better than 1994 and 1995 were. In the face of price uncertainty and volatility, policy uncertainty also looms ahead.