Mix Pricing Update – July 2024

With school out and the summer heat upon us, we are seeing lots of families at the local creameries and frozen custard shops. We hope everyone is off to a fantastic start and is enjoying their summer.

Unfortunately, not only is the weather heating up, but so are the stock and commodity markets. Demand is up for milk and butter, and unfortunately dairy herds are still down from last year. This is resulting in a continued push for higher prices. Even if it is not rational, it doesn’t stop the markets from pushing our prices up. Coupled with the dairy demand, the avian flu is continuing to infect both flocks and dairy herds in multiple states. This is having an adverse effect on egg prices and will add to the increase in frozen custard prices. We know this is not welcome news. As we saw a couple years ago, prices will go up, but let us not forget they also will come down.

Several factors are contributing to the current situation:

Increased Dairy Demand and Reduced Supply
The demand for dairy products typically rises during the summer months as more people consume ice cream and other dairy-based treats. According to the U.S. Department of Agriculture (USDA), the dairy herd size has decreased by approximately 1% compared to last year. This reduction in supply, coupled with increased demand, inevitably leads to higher prices.

Impact of Avian Flu
The avian flu continues to affect poultry and egg production across multiple states. The USDA has reported significant outbreaks, leading to a substantial culling of infected flocks. This reduction in poultry numbers directly impacts egg production, further driving up costs. Eggs are a crucial ingredient in many frozen custard recipes, thus affecting our overall production costs.

Market Volatility
Commodity markets are known for their volatility, influenced by various factors including weather conditions, global demand, and geopolitical events. Currently, market speculators are pushing up the prices of dairy commodities in anticipation of continued supply constraints and high demand.

Future Outlook
While the current situation is challenging, it is important to remember that markets are cyclical. Historically, price surges are followed by periods of stabilization and reduction. We remain optimistic that as the supply chain issues are resolved and the impact of the avian flu diminishes, prices will eventually level off and decrease.

We wish you success and will keep you posted on the status of these commodities throughout the season. As always, thank you for your continued business and the privilege to serve you.

1. USDA Dairy Statistics
2. Milk Production Reports
3. USDA Avian Influenza Outbreaks
4. Commodity Market Trends