Milk production is picking up, as dairy producers add cows and feed for higher production per cow.
USDA’s Milk Production report estimated July’s production 3.9% higher compared to a year earlier, and revised June’s preliminary estimate, with June 2014 production now 2.2% higher than a year ago.
Through reduced culling and adding dairy replacements, July milk cows numbered 0.4% higher than a year ago. Dairy cow slaughter this year is 10.3% lower than a year ago.
The combination of strong milk prices and much lower feed costs has meant very favorable margins for dairy producers to increase milk production.
Corn prices are 44% lower than a year ago, and soybean meal prices are starting to decline, now 5% lower than a year ago.
Alfalfa hay prices are just 3.3% higher than a year ago. However, California, with a severe drought, is experiencing alfalfa hay prices 35% higher than a year ago.
Based on July estimates for the 23 reporting states, 11 had more cows than a year ago; 21 had more milk per cow; and 20 had more total milk production.
In the West, July milk production was well above a year ago, except in New Mexico. Milk production was up 8.9% in Arizona; 4.4% in California; 4.0% in Idaho; and 5.5% in Texas. Milk per cow was higher for each of these states, but cow numbers were down slightly in California and New Mexico.
The Northeast showed strong increases in milk production, up 8.2% in Michigan; 4.8% in New York; 3.4% in Ohio; and 3.0% in Pennsylvania. Each of these states had more milk per cow, but Pennsylvania and Ohio had fewer cows.
In the Upper Midwest, the increase in milk production was not as strong. Milk production was slightly lower in Minnesota; 1.6% higher in Iowa; and 3.4% higher in Wisconsin. Each of these states had higher milk production per cow, but each had fewer milk cows.
August prices strong
Despite milk production picking up, butter and cheese prices will average higher in August. On the CME, butter averaged $2.46/lb. in July, but has been higher in August, reaching $2.66/lb. on Aug. 15. Cheddar barrels averaged $1.997/lb. in July, and increased to $2.21/lb. on Aug. 15. The 40-lb. cheddar block price averaged $1.987/lb. in July, increasing to $2.22/lb. on Aug. 15.
Except for July, cheddar block have averaged above $2/lb. every month this year; cheddar barrels averaged above $2/lb. in the first quarter of the year, and near $2/lb. since then. Higher cheese and butter prices, along with dry whey holding at 67¢/lb., will result in an August Class III price near $22.20/cwt., compared to $21.60/cwt. in July.