Although milk production in the U.S. is up for the 14th straight month, two leading market economists say the latest report released on Tuesday shouldn’t have a negative impact on prices.
“I’m not surprised in the increased milk production,” says Greg Scheer, economist with Doane Advisory Services in St. Louis. Yet, he said he was surprised that cow numbers increased as much as they did, considering the pace of dairy-cow slaughter and current beef prices. “It shows we have a lot of replacement heifers,” he said.
According to the latest “Milk Production” report from the U.S. Department of Agriculture, production in the top 23 states increased by 2.4 percent in March compared to the same month a year earlier. And, the number of milk cows increased by 93,000 head over that same time comparison (and 17,000 head compared to February).
Tuesday’s report shouldn’t have a negative impact on milk prices, according to Scheer. The futures market had built in expectations similar to what came out in the report, he added.
“I don’t see it having a big market impact,” he says.
Dave Kurzawski, dairy analyst with FC Stone/Downes-O’Neill in Chicago, agrees with that assessment. He says the report, in his opinion, was neutral.
It’s important to look at both the supply and demand supply of the equation, he points out. While supply has been increasing, demand has been good — led by a growing export market and a desire by commodity buyers to own cheese.
He did point to increased cow numbers as a potentially bearish sign, adding that they were up more than expected.
However, with a nearly $3 decline in Class III prices from March to April and lower margins (due to high feed prices), there may be more culling of cows in the coming months, he said.