Milk Cow Population Slips as Low Milk Prices Slide

USDA-National Agriculture Statistical Service (NASS) estimated that the milk cow herd slipped 8,000 cows during July, which is the same as the year-over-year. That was the lowest herd tally since last October. U.S. milk production was up 0.4%, tied for the smallest year-over-year percentage increase since April of this year.

Over the last 12 years, the U.S. milk cow herd count has declined three times from June to July: 2009, 2012, and 2015. In all three of those years, mid-year milk prices had declined by at least 20% from the prior year. In the case of 2009, milk prices were 40% lower than a year earlier. The size of the milk cow herd in 2009 and 2012 continued to decline and was smaller at year-end, while the year-end dairy herd at the end of 2015 was only up 6,000 head. The All-Milk price received by farmers in June was only down 6% from a year earlier, as reported by USDA-NASS. Milk prices have not gyrated as dramatically as they have in the past, but have not been able to recover significantly for an extended period, back to 2015.

Chart

Normally, the milk cow herd expands in the last few months of the year as the fall crop harvest gives milk producers a better idea about the outlook for feed costs in the coming year and demand for dairy products improves going into the late-year holidays. In 2017, milk cow numbers settled back slightly in the last quarter after expanding rapidly in the first half of that year. This year may see a similar pattern, even though fall harvests of corn and soybeans are expected to be bountiful. The exception will be hay, with alfalfa prices supported by limited inventories remaining from the 2017 harvest and production that is up from prior years but not by enough to pull prices down significantly.

The demand side of the dairy market has provided a headwind. Fluid milk retail sales volumes in June were down 4% from a year earlier, putting an exclamation point on sales volumes that were down 2% for the first half of the year. Cheese and butter usage is up this year, but not by enough to negate the effects of challenges for fluid milk products. Butter usage during the first half of the year was up 2%. American-type cheese usage was up 6% in the first half while other cheeses (mostly Italian types) were up 2%, but most of this increase was registered during the first three months of the year. Inventories of all these products in cold storage is characterized as burdensome. Reducing those inventories is probably a priority for milk prices received by producers.

 
Comments