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Milk Production Climbs Slowly

The T.C. Jacoby Weekly Market Report Week Ending April 21, 2023

With more cows in the barn, milk production climbed, but the increase was far from formidable. Our competitors overseas also reported modest growth.

Milk prices are woefully inadequate to cover today’s stubbornly high feed costs. With poor margins and rising beef values, dairy producers are culling harder. Through early April, dairy cow slaughter volumes were 3.7% ahead of the 2022 pace. And a growing number of producers are calling it quits. Each of the major livestock auctions features a new dairy sale every couple of weeks. Nonetheless, according to USDA’s latest assessment, dairy producers added 9,000 cows in January, 24,000 in February and 6,000 in March. The national milk-cow herd now stands at 9.435 million head, larger than in any month since August 2021 and up 31,000 cows from March 2022.

At first glance, the increase seems curious. But a look at the state-level changes suggests that USDA’s best guess is at least plausible. The agency estimates that dairy producers added a net of 7,000 cows in Texas and 4,000 head in Kansas in the first quarter, which aligns well with expansions meant to supply new dairy processors in those states. Dairy producers started milking cows in some new barns in South Dakota and Idaho early this year, and USDA reports growth of 4,000 head and 7,000 head, respectively, in those states. Several states added a net of a few thousand cows, as dairy producers filled up new facilities or crowded their barns to try to boost milk revenues. For now, new or expanded dairies are adding cows more quickly than their competitors are losing them, delaying the transition from low prices to tighter milk supplies, and pushing the eventual recovery in milk prices farther into the future.

April 24, 2023



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