Over the past several years, Class III milk has made big swings from $15.00 to $24.00, and back to $15.00 again. We’d like to say the magnitude of the volatility is fleeting. However, market shocks like the impact of COVID, the Farmers to Families Food Box program (which led to artificially inflated prices), and structural changes like the transition to electronic trading on the Chicago Board of Trade appear to have created a long-term shift in what we can expect from market volatility. This puts dairy producers like you at greater risk.

 

Check out the orange line in the illustration below and imagine that the market price is behaving similarly. As you well know, you need to sell your milk as soon as you produce it, and if you take the market price, you are also taking on the full volatility of the market. Yes, you get a higher price when you’re at the top end of the market. You also absorb low prices when times are bad. Although you might think your average price evens out over time, it’s harder to manage long-term investments or cover costs in hard times. Instead, strive to manage your price so that your average weighted price – the price you build over time as illustrated in the dotted red line below – moves you closer to the top of prices and further from the bottom.

 

 

 

 

Risk management success relies on your comfort in understanding market forces and understanding the tools that can help you harness the market. While we regularly illuminate what’s going on in the market, we invite you to look at marketing tools below that can help you convert your market knowledge into strategy. The key to using all these tools is to recognize that, while one tool alone can help you manage risk, using them in combination can make a big difference toward your goal of a solid weighted average price. As you review the tools, think of the first two (government-subsidized insurance) as a base risk management layer that we think could benefit producers. Following them are tools that can help you further manage your weighted average price. Pay attention to some of the risks; like any good tool, marketing tools can be dangerous if you don’t pay attention to what can hurt you.

 

Be sure to consult with your insurance agent and/or commodity broker to understand the additional factors, details, and costs involved in these tools prior to entering into any agreement.

 

Information on insurance tools is provided by SP Risk Services LLC, an insurance agency.

 

 

 

 

Taking Action

 

Managing the price you get for the milk you produce can make a big difference in the success of your operation, and it isn’t easy. You need to have a good plan of how you will layer the tools and at what prices you want to take action to build a better weighted average price. The first and best way to take action is to ask questions. Ask how the tools work and how to layer them in the current market environment. Ask what should trigger a decision to make an insurance claim or execute a put or call action.  Build a plan that allows you to take advantage of what the market has to offer instead of being pulled in all directions by market action.

 

We can help. We’ve been helping dairy farmers manage milk about as long as they have offered milk futures at the Chicago Mercantile Exchange. We would be honored to help you as you continue to build a successful operation.

 

 

Do you have questions about expectations, market reactions or our recommendations? We’re here to help.

 

Give Total Farm Marketing a call at 800.334.9779 to discuss your situation and how we can help you in your marketing decisions.

 

 

©April 2026. Total Farm Marketing. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Examples of seasonal price moves or extreme market conditions are not meant to imply that such moves or conditions are common occurrences or likely to occur. Futures prices may have already factored in the seasonal aspects of supply and demand. The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Reproduction of this information without prior written permission is prohibited. This material has been prepared by a sales or trading employee or agent of Total Farm Marketing and is, or is in the nature of, a solicitation. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing refers to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. Stewart-Peterson Inc. is a publishing company. SP Risk Services LLC is an insurance agency and an equal opportunity provider. A customer may have relationships with any of the three companies.

 

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