Heat and humidity took a toll on milk production in July in some parts of the country, adding to the dampening production growth driven by low milk prices.
Milk production was down year over year in 11 of the 23 states in USDA National Agricultural Statistics Service’s monthly report.
Cow numbers were also below year-ago levels in 13 of the states, and milk production per cow was down in eight of the states.
Nationwide production was up just 0.4 percent in July year over year, and production per cow was up just 0.5 percent. Cow numbers were down 8,000 head from both June and year-earlier levels.
Top dairy state California had 12,000 fewer head than a year earlier, and the heat took 35 pounds out of per-cow production year over year. Milk production was down 2.5 percent in July from year-earlier levels.
Milk prices have been lackluster all year, but the Class III price lost $1.11 per hundredweight from June to July and sank to $14.10.
Producers’ mailbox checks are well under cost of production, and dairy cow slaughter was 4.9 percent higher year over year from January through June.
“It appears dairy prices may have overreacted late June and early July to retaliatory tariffs to be implemented about mid-July by Mexico, China and Canada,” Bob Cropp, a University of Wisconsin economist, said in his latest Dairy Situation and Outlook Report.
But dairy product prices have recovered some in August. The August Class III price should improve to around $15. The Class IV price, which fell to $14.14 in July, should strengthen to around $14.70 he said.
“The major factor for improved dairy product prices and milk prices is milk production,” he said.
Milk cow numbers in the U.S. could fall further with milk production per cow improving with cooler weather by October. The growth in U.S. milk production could stay at 1 percent or less, which would be positive for prices,” he said.
The EU is experiencing some severe drought, which has reduced crop production and increased feed costs. New Zealand might see some recovery in milk production, but it’s only projected to increase 2 percent.
“So the growth in world milk production is likely to be lower, resulting in world milk prices staying relatively strong,” he said.
U.S. dairy exports have been a positive factor for milk prices, but the uncertainty is how they will do for the remainder of the year now that the retaliatory tariffs are in effect, he said.
U.S. milk prices for the remainder of the year are also uncertain. But Class III could improve to the high $15s and even touch $16, and Class IV is likely to be in the $15s, he said.
Last week, USDA’s Economic Research Service forecast a Class III of $14.50 to $14.70 for 2018 and $14.95 to $15.95 for 2019.
The agency’s forecast for the Class IV price is $13.95-14.25 for 2018 and $13.75 to $14.85 for 2019.