Milk production in the United States has declined rapidly in recent months as a result of the corona crisis. In May, the supply was even below last year's level, something that had not happened for a long time. However, the recovery is not long in coming, because in June production was already ahead of last year. The significantly higher milk price is...
Last month, U.S. dairy farmers in the top 24 producing states produced 7,89 million tons. This is an increase of 0,5% compared to the same month in 2019. In May, production was still one percent behind last year. As a result, the seasonal peak did not occur in May as is usual, but was already reached in March. On balance, American milk supplies in the second quarter were half a percent higher than last year.
Class 3 milk price significantly higher
It is not surprising that American dairy farmers are increasing production again. After all, the milk collection problems that arose due to the corona outbreaks in April are a thing of the past. The rising milk price is an incentive. This fell sharply in recent months, but a strong recovery followed in June. The class 3 milk price (intended for cheese production) was $21,04 per CWT in June, which translates to approximately €41 per 100 kilos. Compared to May, the payout increased by 73%. A record increase. The other milk prices (class 2 and 4) also rose, but considerably less rapidly.
The unprecedented rapid recovery in the milk price is due to the record high cheese price in Chicago. This rose by more than 150% to more than $6.000 per tonne between April and mid-July, after which the price fell slightly. The increase is a combination of lower cheese production this spring and significantly more retail demand. Cheese stocks have therefore fallen considerably, but in mid-June (642.000 tons) were still higher than in previous years. The rapid increase in the price of cheese therefore raises questions and is probably also related to President Trump's food purchasing program.
Record export volumes in May
Cheese exports also provide support, although the exported volume is small compared to production. In May, volume rose to the second best level ever: 1 tons. This is thanks to strong demand in Asian sales markets such as Japan, China and South Korea, where Europe is also active. Milk powder exports in May were also significantly higher. Exports of skimmed milk powder (including non-fat dry milk) rose to a record volume of 35.000 tons, a quarter more than May last year. In total, the US exported $79.000 million worth of dairy products in May, an increase of 585% compared to 8. Not bad in the middle of the corona crisis.
Export expectations for later this year are tempered by analysts. This is due to a shrinking global economy and high dairy stocks in Europe. In addition, export giant New Zealand will be back in the season from September, which will increase production considerably and probably also the urge to export. The recently published domestic milk supply estimates from the US Department of Agriculture (USDA) for the remainder of 2020 indicate slight growth.