February milk production in the 23 substantial milk-producing states, at 14.9 million pounds, was up 1.4 percent from February 2013, according to USDA’s National Agricultural Statistics Service.
But producers have been slow to respond to an all-milk price that has been running above $20 per hundredweight of milk since September.
While production was up over last year, February 2013 production was down 3.3 percent from February 2012. At 8.511 million head, cow numbers were 13,000 higher than February 2013 but 1,000 head lower than January, NASS reports.
The national all-milk price for February was a record high $24.70 per hundredweight, following prices of $23.50 in January, $22 in December, $21.60 in November, and $20.10 in September, according to USDA.
Income over feed costs have been exceptional and has been sustained above the $7 per hundredweight level that normally triggers expansion since September. It was $11.29 in February, $10.57 in January, $9.56 in December, $9.35 in November, $8.61 in October, and $7.77 in September, according to calculations by the University of Wisconsin.
But milk production increases have been lackluster, up only 0.4 percent October through December over a year earlier, 1.3 percent in January and 1.4 percent in February, according to NASS reports.
The slow response to favorable conditions has surprised analyst, even when recognizing a lag time for lower feed costs reaching the farm, forage quality issues and different market and weather conditions in different parts of the country.
Production declines in the Midwest in February were no surprise, given the harsh winter weather there. Year-over-year production was down 3.7 percent in Ohio, 3.2 percent in Illinois, 2.7 percent in Iowa, 2.3 in Minnesota, and 2.0 in Wisconsin, NASS reports.
Declines were also seen in Mexico and Pennsylvania, down 1.4 percent and 0.2 percent and, respectively.
Sixteen of the 23 selected states did post increases, with drought-stricken California taking the biggest advantage of recent record-high milk prices. Dairymen there boosted February’s year-over-year production 5.3 percent to 3.4 million pounds with an additional 1,000 head. But the state’s February 2013 milk production was down 8 percent from a year earlier.
Idaho’s milk production was up 2.6 percent with 11,000 fewer cows. But that increase compares with a 3.3 percent decline in milk production in February 2013 from a year earlier.
With additional processing competition and a premium on components, Idaho’s milk price runs about $1.15 above Class III, and dairymen are definitely realizing profit and positive cash flow, Rick Naerebout, manager of Independent Milk Producers co-op, said.
Based on a ballpark cost of production of $18 per hundredweight, they would have shown a steady profit since April of 2013. Yet year-over-year milk production was down July through December, increasing just 0.4 percent in January.
With high beef prices, and the potential to get $600 to $800 per cow, dairymen were culling aggressively in the last half of 2013. The drop in corn and hay prices last year only decreased feed costs about 50 cents per hundredweight of milk, and there’s been concern of competition for hay from California, he said.
Other factors involved in a slow response to high milk prices include recovering from the 2009 steep downturn. Dairymen are catching up with deferred equipment replacement and facility maintenance on top of trying to pay down debt to the bank. They’re also looking to build feed inventories as a risk-management tool, he said.
“Dairymen want to be in a position to weather the next storm that comes along, and it will take time to rebuild confidence” to expand, he said.
With springers going for more than $2,000 a head, dairymen aren’t too excited about adding springers. They did that in 2008, then 2009 hit, he said.
In the past, Naerebout said, today’s milk prices would have spurred new 1,000-cow dairies, but expansions aren’t happening. Confidence in sustainable profitability and milk-production increases will take time, he said.