Inside Milk
US milk supply appears to be leveling off
Although the milk supply in the United States (US) is higher in July than last year, the growth is modest. For the first time this year, the increase was limited to less than 0,5%. How is the milk price reacting to the trade war?
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Dairy processors collected 7,85 million tons in July, which is an increase of 0,4% compared to the same month last year. This means that the milk supply clearly shows a leveling off. In the first quarter of 2018, the difference with 2017 was still an increase of 1,5%, while in the second quarter of this year 0,9% more milk was produced.
Production per cow is increasing
The American dairy herd is showing a decline. Compared to 1 month earlier, the number of dairy cows has shrunk by 8.000. However, the livestock herd recorded approximately 1.000 more cows than in the same month in 2017. However, compared to the total dairy herd (9,4 million cows), these changes are negligible.
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The milk supply for July was 0,4% above the level of last year.
The average monthly milk production per cow continues to show an upward trend. This amounted to 898 kilos in July, which is the highest volume since 2003. From that moment on, the American Department of Agriculture (the USDA) started recording the figures.
Milk price under pressure
The milk price in the US is under pressure; mainly due to uncertainties caused by the trade war. The 'benchmark milk price' (Class III) of the USDA was $14,10 per CWT (=50,8 kilos) in July. That is $1,11 lower than 1 month earlier and $1,35 lower than the same month 1 year earlier.
The decrease is related to the listing of Cheddar 40 cheese. This manufacturer reacts strongly to the import duties that China, Mexico and Canada impose on American dairy. Since the end of May, the price has fallen by more than $200 to $3.457 per tonne. This makes the price about $400 below the long-term average.
The trade war has a negative effect on the price development of Cheddar.