The USDA released the October Milk Production report on Friday, as originally scheduled. This gets the market up to date with at least one report, now back on schedule. They also released the August Dairy Productions report Friday as well, but the market is still waiting for the announcement of when we will see the September report to play catch up for that information as well.
In a shocking discovery, the Milk Production report has the first decline of cow numbers since 2024, indicating a shift to cull more cows with falling milk prices. In October the beef cattle prices peaked as milk prices were sharply declining. It made for the perfect opportunity to send the lower producing cows to market to gain a quick revenue stream to make up for the lacking milk check as well as lower the feed bill.
It is speculated that this trend of a shrinking dairy herd will continue as feeder cattle futures have fallen over 80 cents per pound since mid-October. This gives less cash flow to the farms that have been getting by from profit from beef-on-dairy calf sales. The impact of the fallen milk prices will hit harder, making culling decisions for cows with less-than-ideal milk production more necessary.
The Milk Production Report itself was still perceived as bearish. Showing 3.7% higher milk production compared to October 2024. As well as the August Dairy Products report, showing more cheese, butter, dry whey, and Non-Fat Dry Milk produced when compared to 2024.
The Dairy Products report wasn’t all bearish though. There was a decline in production from the July report in nearly all dairy products, with the most significant decline in production in butter, down 2.9% from July production. Frozen products saw a more significant decline in production from 2024, down 5.5% to 10.1% in ice cream products, and a whopping 19.3% lower in Sherbert from last year.
In a world of bleak and dreary dairy market news, we look for silver linings and a drop in cow numbers may be just what the declining dairy market needs to have some hope for the future of diary prices next year. The old adage is “the cure for high prices is high prices, and the cure for low prices is low prices”. Low prices discourage inefficient or marginal producers. Culling those marginally producing cows may bring a shortage of production overtime and hopefully lead to higher prices. In the meantime, the industry has shown how resilient our American dairy farmers can be by increasing efficiencies and coming up with new innovations. So, while the markets look bleak today, there is still a lot to look forward to.
Sarah Jungman is a commodity broker with AgMarket.Net and AgDairy, the dairy division of John Stewart & Associates Inc. (JSA). JSA is a full-service commodity brokerage firm based out of St. Joseph, MO. Sarah’s office is located in Winterset, Iowa and she may be reached at 515-272-5799 or through the website www.agmarket.net.
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