Inside Milk
US milk price remains meager for the time being
Although the milk supply in the United States (US) is clearly leveling off, a higher milk price is not in the offing. American dairy farmers are plagued by the trade war with China, with no white smoke expected for the time being.
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In June, dairy processors in the 24 largest dairy states collected 7,86 million tons of milk, according to figures from the US Department of Agriculture (USDA). This is only 0,1% higher than the same month in 2018. Given that milk production is virtually the same as last year for the fourth month in a row, it can be concluded that the leveling off trend after years of growth is not an incident.
The decline in milk production is due to the shrinkage of the American dairy herd. In June, 8,78 million dairy cows were registered. This was 62.000 fewer than a year ago. The decline is partly due to: stoppers wave in 2018, because of the low milk price. However, the milk supply does not decrease, but remains stable due to the higher production per cow. In June the average milk production was 896 kilos per cow.
Little room for higher milk prices
The milk price in the US has escaped from the lower regions in recent months. The milk price for class III, intended for cheese production, amounted to $16,27 per CWT (50,8 kilos) last month. This translates to €31,76 per 100 kilos of milk. Although this is approximately 10% higher than a year ago, the price level is still quite poor from a historical perspective.
The USDA expects the American milk price to increase further to $17 per CWT in the third quarter, but to decline somewhat in the fourth quarter. The Ministry of Agriculture does not expect a high milk price for the first two quarters of 2 either.
Trade war with China
The milk price is being depressed by the trade war with China, which is putting pressure on American dairy exports. Former Secretary of Agriculture Tom Vilsack, who is currently chairman of the US Dairy Export Council, is less than optimistic. He expects the trade war with China to remain in force.
He is more optimistic about the new trade agreement with Mexico and Canada, which goes by the name USMCA. Although a number of wrinkles still need to be ironed out, the former agriculture minister expects a final agreement to be reached in the autumn.