Inside Milk
US milk supply shows trend break
Milk production in the United States has been showing an upward trend for years. However, the supply figures for March are turning red. What is the reason for this, and why is the milk price rising?
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Milk production in the top 23 producing states stood at 8,08 million tonnes in March. This is 0,1% less than in the same month in 2018. This clearly shows a leveling off of milk supply, which has also become visible in recent months. The last time supply turned red was in February 2017.
The reason for the leveling off is the decrease in the number of dairy cows. If the figures are compared with 1 year earlier, there is a decrease of 50.000 cows to a total of 8,71 million. Milk production per cow reached a new record in March, reaching 927 kilos (+4,5 kilos, compared to the same month in 2018). This indicates that the least productive cows have probably been cleared out.
More cows per company
Many American dairy farmers threw in the towel last year. Recent figures from the US Department of Agriculture (USDA) show that the number of dairy farms shrank by approximately 6,5% last year (-2.750 farms). This decline has been going on for years, but intensified in 2018 low milk prices, which was partly a consequence of the trade war that US President Donald Trump is waging with major dairy importers such as China, Canada and Mexico.
At the same time, permanent dairy farms are becoming increasingly larger. The average number of cows on 1 dairy farm in California was 2018 cows in 1.299, compared to 10 cows 968 years ago. In Texas, the average number of cows per farm has even doubled in the last 10 years to 1.343 cows. Because other states have relatively small dairy farms, the average number of cows per dairy farm is much lower. In 10 years, the average American dairy farm has grown from approximately 90 cows to 251 cows.
Cheese exports are picking up
Meanwhile, milk prices in the United States are picking up again. The average (class III) milk price increased by almost 10% in March to $15,04 per CWT (approximately 45,4 kilos). Converted into euros, the American milk price is €29,33 per 100 kilos. Prices are still below cost-covering levels, but the increase has started again.
In addition to leveling off milk production, stronger exports are the driving force behind higher milk prices. The United States exported 32.515 tons of cheese in February, an increase of 16% compared to last year. Sales to South Korea increased by no less than 71% to 7.154 tons. Export volume in February was the second best level ever for that month.