Analysis US milk supply
American milk supply sees peak in summer months
The American milk production shows a mixed picture for the months of June, July and August. The corona crisis initially held the market in its grip, but is overruled by the change in milk money.
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After a brief disruption, especially in May, milk supply recovered relatively quickly in the following 3 months. The periodic dip in June was not too bad and production was 0,8% higher than in June last year. The supply in July and August then rose sharply by 2% and 1,9% respectively compared to the same month in 2019.
The 3 summer months remain far above the 5-year average this year. Only the month of June remains just below 8 million tons, while July and August go well beyond this with 8,12 and 8,06 million tons respectively.
Favorable developments
The increase in milk production can be explained by two developments. For example, the American food sector has recovered reasonably well in recent months after the first lockdown in March. Many states indicate that they do not want to introduce a second lockdown, except for Texas, California and New York, which are tightening the strings again.
A second development that affects the milk supply is the sharp rise in milk price in June and July. While the prospects were still sad in May, with a price of €24,55 per 100 kilos of milk converted, that sentiment turned completely in June. Milk prices skyrocketed in prices of €41,21 in June and €47,20 in July. With this, the price in June was almost 30% above the price in the same month the year before and in July it was even just under 40% above the price in July 2019.
Because processors were given more air again, it was very attractive for American dairy farmers to supply as much milk as possible. Unfortunately, the joy was short-lived, as the price dropped by more than €10 per 100 kilos of milk in August to €36,85. The reason for the brief price rally is unclear.
Corona crisis
It is also for American dairy farmers to wait and see how the corona crisis will develop further. The milk supply was severely disrupted in the months of April and May. Due to the disappearance of the sales markets in the food sector, the dairy farmers were forced to use milk wash away, because the processors could not keep up with the supply. The fact that the winter months are approaching can provide some relief, because the milk supply is periodically reduced.