The U.S. dairy market seems to be in a Goldilocks period. Relatively weak production is matching up with relatively weak demand to keep milk prices at good levels, while lower feed costs are boosting margins for dairy farmers. I don’t know how long this will last, but let’s walk through the situation.
USDA just released the June Milk Production report, and headline U.S. milk production was down 1% from last year, which was a little worse than the 0.7% drop I was forecasting. However, the fat and protein in the milk are still running well above last year, so if we look at it on a component basis, production was up 0.7% from last year. Still, that is slower than normal growth. I’ve been expecting the dairy herd to flatten out with slaughter that has been running 15% to 20% below last year, but USDA estimates that we lost 13,000 milking head between December and June. We still haven’t slowed slaughter enough to match the lower heifer supply.
Milk production per cow has also been weak, down 0.3% from last year in June. Highly pathogenic avian influenza is still spreading in the dairy herd and has caused a drag on yields. The confirmed number of cases has continued to trend higher during July, but most of them have been in Colorado with very few reported in other states. This suggests that the spread might be slowing down. However, it is very hard to say with testing still mostly voluntary.
Aug. 1, 2024
Nate Donnay
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