
An unusual string of 13 consecutive months with U.S. milk production falling below year-earlier levels ended in August, and a 16-month streak of U.S. dairy cow numbers being down from a year ago ended in October. This suggests that the U.S. dairy industry has returned to some level of expansion mode.
Meanwhile, an average Dairy Margin Coverage (DMC) margin of $11.61 per hundredweight (cwt.) during the first 10 months of 2024 has likely fueled this change, helping overcome the headwinds of scarce heifers, costly facility construction costs, and the recent bout of inflation affecting many other dairy cost items that have kept U.S. milk production flat at about 226.4 billion pounds for the past three years.
A muted outlook
What might a return to expanding milk production do to milk prices this year? How might it affect the supply and demand balance, given how frequently episodes of production growth have tended to overshoot demand growth in the past? One suggested answer to these questions is a weaker price outlook.
December 27, 2024
Peter Vitaliano
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