Ripple effects: Milk market plot thickens

ZISK
Aug 11
2 min read

At any given moment, determinants contributing to the dairy market are — to say the least — dynamic, interconnected, and cumulative. But the industry has recently seen several seismic changes that have not just shifted but reshaped the state of dairy and its outlook, said CoBank’s Corey Geiger and Abbi Prins, who presented the July Hoard’s Dairyman webinar. Due to factors like advances in genomics, nutrition, and reproduction options, along with domestic dietary trends and international consumer demands, the landscape of the market has drastically changed in a surprisingly short time. The webinar broke market forces into four main areas: production, processing, consumer demand, and cattle inventory.

The conversion to components

Geiger, who is a lead dairy economist with CoBank, set the stage by addressing the biggest factor in production, one that has morphed how milk is valued: Components now take precedence over volume. “A paradigm shift has happened. From 1945 to about 2010, if you were talking milk production or milk component production, they were one and the same. That’s decoupled,” he said, pointing out that from 2011 to 2024, milk production grew 15.9% versus component growth, which in the same period grew 27.2%. “The trend is accelerating,” Geiger said, adding that this revolution is influencing the processing arm of the dairy industry as well. Using cheese production as an example, Geiger compared the conventional wisdom of the past to the realities of the new normal. “For almost everyone’s generation, the rule of thumb was 100 pounds of milk makes 10 pounds of cheese. But cheese production is driven by components, and in the past years there has been that 12.5% growth, so now 100 pounds of milk makes 11.4 pounds of cheese,” he said.

Click here to continue reading