Higher prices prompt increase in milk production
Responding to higher milk prices and lower feed costs, dairymen increased milk production in July, according to a USDA report released Aug. 19.
“The level of feed prices and much lower feed costs has meant very favorable margins for dairy producers to increase milk production,” Bob Cropp, professor emeritus, University of Wisconsin, said in his Dairy Situation and Outlook report released Aug. 19.
The 23 major milk-producing states produced 16.4 billion pounds of milk in July, a 4 percent increase over July 2013, the USDA reports.
July marks the highest year-over-year monthly increase since February 2012 when production increased 8.2 percent over February 2011.
At 1,911 pounds per cow and up 61 pounds over July 2013, cows weighed in with the highest July milk production since the 23 state series began in 2003, USDA reported.
Cow numbers, at 8.58 million head, were up 56,000 from July 2013 and 6,000 from June.
Twelve of the 23 states showed a year-over-year increase in cow numbers, 10 had fewer cows and one, Oregon, held steady.
Oregon, Minnesota and New Mexico posted lower milk production numbers, and Oregon and Texas showed a decline in milk per cow.
Despite the drought, higher hay prices and 2,000 fewer cows, California dairymen increased year-over-year production 4.4 percent to 3.5 million pounds. Idaho’s milk production increased 4 percent to 1.2 million pounds with 6,000 additional cows.
Washington dairymen increased production 2.9 percent to 563,000 pounds with 6,000 additional cows. Oregon decreased production 0.9 percent to 215,000 pounds with the same number of cows.
While New Mexico’s milk production was down slightly on 1,000 fewer cows, production in other western states showed a notable increase. In addition to increases in California and Idaho, production was up 8.9 percent in Arizona and 5.5 percent in Texas.
The Northeast also posted strong increases in milk production, up 8.2 percent in Michigan and 4.8 in New York, both with additional cows. Production was also up 3.4 percent Ohio and 3.0 in Pennsylvania, both with fewer cows.
In the Upper Midwest, Wisconsin posted a 3.4 percent increase in milk production with 2,000 additional head and Minnesota’s production declined slightly with 5,000 fewer head.
With good domestic sales and strong exports, the need for higher stock levels of butter and cheese exists, Cropp said. But increased milk production globally and slowing Chinese demand has resulted in U.S. prices for dairy products above world prices.
“To maintain export levels, U.S. prices will have to come down closer to world prices. Yet export volume will likely hold at levels that will end the year above the record level of 2013,” he said.
But U.S. dairy production and milk prices are expected to decline. Given the time it will take to build stocks, prices could gradually decline rather than take a sharp fall, he said.
Dairy futures remain optimistic, with Class III milk staying above $21 per hundredweight through October, above $19 for December and above $18 for 2015. Class IV futures stay above $20 through October, decline to less than $18 by December and stay in the $17s for 2015, he said.
Odds are prices later this year and into 2015 could average lower than the futures, but milk prices will set new records in 2014, he said.
Cropp expects Class III prices to average well over $21 this year, compared with $17.99 last year. He expects Class IV prices to average above $22, compared with $19.05 last year.
“We can expect milk production to run 4 percent or more higher than a year ago for the remainder of the year and end the year around 2.4 percent higher than 2013,” he said.
July milk production, top 10 states
State July ’13 July ’14 percent change
Calif. 3,373 3,520 4.4
Wis. 2,315 2,394 3.4
NY 1,135 1,190 4.8
Idaho 1,174 1,221 4.0
Penn. 870 896 3.0
Texas 820 865 5.5
Minn. 765 764 -0.1
Mich. 766 829 8.2
NM 689 688 -0.1
Wash. 547 563 2.9