Spring is in the air, and the calendar indicates the traditional milk production “spring flush“ is about to begin. USDA’s monthly milk production report shows it may have gotten an early start in some states.
Nationally, March 2016 milk production was estimated at 18.41 billion pounds, up 1.8 percent from a year earlier. The increase was built on more cows, up 14,000 compared to a year earlier, and improvement in milk per cow, up 32 pounds from March 2015, to 1,974 pounds per cow.
March 2016 milk production in the 23 major states totaled 17.22 billion pounds, also up 1.8 percent from a year earlier. Milk cows in those states were estimated at 8.64 million head, 19,000 head more than March 2015 and 9,000 head more than February 2016. Production per cow averaged 1,993 pounds, 31 pounds more than March 2015.
Largest year-over-year gains in milk production were primarily in the northern tier of states, stretching from New York to South Dakota.
“We’re not in the spring flush, but in the Northeast and Midwest production is really moving,” said Bob Cropp, professor emeritus with the University of Wisconsin-Madison. “There was pressure on plants last year, and it looks like we’re going to produce an even bigger spring flush. It makes me concerned when we hit the peak of the flush.”
Milk cow numbers have increased each of the first three months this year. As a result, January-March quarterly milk production totaled 53.0 billion pounds, up 2.1 percent from the same quarter a year ago.
“Cull cow prices are quite depressed from a year ago, and slaughter rates have been down recently,” Cropp said in his monthly podcast with Mark Stephenson, Director of Dairy Policy Analysis at the University of Wisconsin-Madison. “Despite low milk prices, producers may be keeping cows longer. Plus, there is a good supply of dairy replacements.“
March milk production was well above a year ago in several Northeast and Midwest states. New York’s production was up 5.5 percent, Michigan was 7.7 percent and Pennsylvania increased 1.7 percent. Other than for Pennsylvania, each of these states had more cows and higher production per cow.
March production was up 2.8 percent in Minnesota, 5.3 percent in Wisconsin and 10.9 percent in South Dakota.
Further west, production trends continue. California’s March milk production was down 2.2 percent, with fewer cows and less milk output per cow. New Mexico, still feeling the impact of Snowstorm Goliath, saw fewer cows and only a small boost in output per cow. Texas cow numbers were up 3,000 head from February 2016, but remained below year-ago levels, offsetting an increase in milk production per cow. More cows and more milk per cow pushed milk production up in Arizona and Idaho.
Price outlook
“USDA’s milk production report for March milk was not good news for milk prices,” Cropp said. “This is a lot of milk considering milk production a year ago was also running 1.4 percent higher than the year before.”
While the domestic dairy market remains strong, exports are still sluggish. With increasing milk production, combined with slow exports and growing product inventories, “we can’t expect much upward price movement over the next month or two,” Cropp said.
April’s Class III price will be near $13.65 per hundredweight, compared to $15.81 per hundredweight last year and $24.31 per hundredweight two years ago. The Class IV price will be near $12.80 per hundredweight, compared to $13.51 per hundredweight a year ago and $23.34 per hundredweight two years ago.
Most price forecasters see a slow increase in milk prices as we move through the year, but they’ll stay relatively low. Current Class III futures don’t reach $14.00 per hundredweight until July and $15 per hundredweight until September, peaking in November in the low $15s. Class IV futures reach $13 per hundredweight in May, $14 per hundredweight in July, $15 in September and peak in the low $15s per hundredweight in November.
USDA now forecasts the Class III price for the year to only average in a range of $13.65-$14.15 per hundredweight; the Class IV price to average between $12.90-$13.50 per hundredweight; and the U.S. all-milk price to average between $15-$15.50 per hundredweight.
Cropp remains confident prices will be somewhat higher than those projections, although they may be slow to arrive.
“If milk production continues to show rather strong increases and exports do not improve more than now projected, (USDA’s) prices are quite likely,” he said. “But, there is still a good possibility prices could do somewhat better than this for the second half of the year.”
Read Bob Cropp’s outlook report. PD
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Dave Natzke
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