January 27, 2020
The U.S. dairy industry continues to consolidate and move westward. The dairy herd east of the Mississippi River has steadily declined over the past four years. Producers in these states milked 2.77 million cows in the final quarter of 2015, but the total dropped 5% to 2.63 million head in the fourth quarter of 2019. In 2016 through early 2018, dairy producers in states west of the Mississippi added cows at a pace that more than offset losses east of the river, and the U.S. dairy herd grew. Western expansion paused in the second half of 2018 and in early 2019, which allowed the industry to trim the herd size that better matched demand. Now, dairy producers in states west of the Mississippi are adding cows again, and after reaching a low in August, the national dairy herd is beginning to expand.
The divide reflects consumer preferences. Fluid milk consumption is steadily fading, while overall dairy consumption is near all-time highs. Fluid milk is generally processed near population centers, so higher fluid milk consumption is most beneficial to dairy producers on the East Coast. In the Upper Midwest, Central Plains and the West, most milk is manufactured into dairy products like cheese, butter, and milk powder that have longer shelf lives and lower water content than fluid milk, making it easier to store products during periods of low demand and more affordable to transport them to consumers across the nation and around the world.
Markets around the world dropped hard on fears that the coronavirus would restrict travel and reduce demand for all types of goods. Dairy markets were not immune. After a healthy rally last week, dairy futures plummeted.
Daily Dairy Report