The U.S. dairy herd continues to grow. At 9.331 million head in April, the nation’s dairy barns and pastures now hold the largest number of cows since December 2008, according to USDA’s monthly milk production report.

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Dave Natzke
Editor / Progressive Dairy

While USDA estimated April milk production was up about 1.2 percent compared to a year ago, it’s the number of dairy cows that stands out. Since Winter Storm Goliath hit herds in Texas and New Mexico in late December, U.S. cow numbers have now increased in four consecutive months. There is an ample supply of dairy replacements, and U.S. dairy cow slaughter is down.

Year-over-year growth in cow numbers was largest in Michigan (+13,000), South Dakota (+11,000), Idaho (+6,000) and Colorado (+4,000). Those gains offset slumping numbers in New Mexico (-12,000) and California (-6,000).

Milk production up 1.2 percent

Nationally, April 2016 milk production was estimated at 18.00 billion pounds, up 1.2 percent from a year earlier. The increase was built on more cows, up 15,000 compared to a year earlier and improvement in milk per cow, up 20 pounds from April 2015 to 1,929 pounds per cow.

April 2016 milk production in the 23 major states totaled 16.84 billion pounds, also up 1.2 percent from a year earlier. Milk cows in those states were estimated at 8.65 million head, 21,000 head more than April 2015 and 4,000 head more than March 2016. Production per cow averaged 1,948 pounds, 19 pounds more than March 2015.

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Midwest, Northeast lead production increase

USDA’s latest milk production report revealed strong year-over-year gains across the Midwest and Northeast, on top of a lot of milk last year. With the increase in cows, South Dakota had a nation-leading 10.5 percent increase in milk production. Michigan’s 6.5 percent increase was built on more cows and a healthy 65-pound increase in milk per cow. Wisconsin production was up 4.6 percent, almost all the result of more milk per cow.

New York’s 5.3 percent year-over-year milk production increase was the result of more cows (+3,000) and an increase of milk output per cow (+90 pounds) compared to a year earlier. Vermont and Idaho also had milk production gains of at least 2.0 percent, with Colorado and Texas not far behind.

April milk production in New Mexico (-3.5 percent), California (-3.3 percent), Virginia (-3.2 percent) and Florida (-3.0 percent) saw the largest year-to-year declines, with fewer cows and steady-to-less milk per cow to blame.

Global supply will determine price recovery

With global demand remaining weak, it’ll take a slowdown on the supply side to initiate a milk price recovery, according to Wisconsin dairy economists Mark Stephenson and Bob Cropp.

The “canary in the coal mine” is the growing inventory of dairy products worldwide, said Stephenson, director of dairy policy analysis at the University of Wisconsin-Madison.

“It’s hard to see a demand solution to the low price,” said Stephenson. “I don’t see anyplace where we’re going to see a big increase in demand that will take a lot of product off the market. We have to imagine the recovery happening when we start to see signs milk production is slowing down and some of the product stockpiles are worked down a little bit.”

Domestic cheese and butter demand remains strong, but there’s no signs of big jumps in the export market, said Cropp, dairy economics professor emeritus at the University of Wisconsin-Madison. There’s plenty of milk in the world market, combined with Russia’s embargo, continued slow demand from China and weak oil prices impacting demand from other emerging markets.

Listen to Stephenson and Cropp’s monthly podcast.

Cropp, who had been more optimistic concerning price recovery in the second half of 2016, said USDA’s latest price outlook now appears reasonable. That means any price recovery is now pushed into 2017.

Weakening cheese prices are pressuring Class III milk prices. The Class III price was $13.63 per hundredweight in April and will be near $12.75 per hundredweight for May, Cropp said. Surprising strength in domestic butter and nonfat dry milk prices will support Class IV milk prices. The May Class IV price will be near $13.25 per hundredweight, compared to $12.68 in April.

USDA’s 2016 all-milk price is projected in a range of $14.60 to $15.10 per hundredweight, compared to $17.11 per hundredweight in 2015. Current Class III futures are less than $14.00 per hundredweight until August, peaking below $15 per hundredweight in December. Class IV futures are a little more optimistic, reaching the $14s by August and the $15s October through December.

MPP-Dairy margin projections dip to $5.50 in June

Forecasts for Margin Protection Program for Dairy (MPP-Dairy) margins now project margins to bottom out in June, at about $5.50 per hundredweight, with margins of about $6.00 per hundredweight in May and July. USDA’s Farm Service Agency announces the April margin, the second piece for the March-April MPP-Dairy pay period, on May 31.

The recent rise in feed prices, and any weather-related crop production problems, could put a damper on U.S. production going forward, Cropp said. There are some predictions for a hot summer, similar to the summer of 2011, which significantly reduced milk per cow in Northeast and Midwest states.  PD

Dave Natzke