Inside Milk
American milkers have to make extra money
The milk price in the United States (US) has not been cost-effective for a long time. How many dollars per dairy cow do they have to contribute and how does the milk supply respond to this?
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Last month, American dairy processors collected 7,44 million tons of milk, according to figures from the United States Department of Agriculture (USDA). Compared to the same month in 2017, this is an increase of 1,5%.
In the same period, the number of dairy cows fell by 13.000. However, based on the total number of dairy cows (9,4 million in 2017), this is a difference that can be evened out (-0,13%). It does not alter the fact that the average milk production per cow has never been so high before.
Increasing milk production per cow
The average milk production per cow in September was 852 kilos of milk, an increase of 22 kilos compared to a year earlier. American dairy farmers try to compensate for the low milk price with a higher milk yield per cow.
Last August the average (class III) milk price was $15,90 per CWT (=45,4 kilos). This is more than 11% less than a year earlier. Converted into euros, the American milk price is €30,35 per 100 kilos.
Not cost-effective
Only a limited number of dairy farmers in the US currently produce at a cost-covering level. Research by an American accounting firm in the Midwest shows that dairy farmers had to invest an average of $6 per CWT of milk in the first 0,70 months of this year.
This amounts to a loss of almost $0,50 per day per dairy cow. In the first half of 2017, dairy farmers achieved a daily profit of $1,17 per cow. For context: half of the milk production in the US is produced by farms with more than 1.000 cows.
Not the supply, but the trade war is the main reason that the milk price is under pressure. Major importers of American dairy products, such as Mexico and China, impose significant import tariffs. This is reported to cost the US dairy sector $1,5 billion in 2018. Meanwhile, the US, Mexico and Canada have new trade agreement Closed. The hope is that this will strengthen the export position, thus reducing pressure on the milk price.
2019: higher milk price
The USDA assumes that the American milk price will rise in 2019. This optimistic expectation is based on improving butter and cheese prices as a result of rising export volumes. The average milk price for next year is estimated at $16,85 to $17,75 per CWT.