Sunday, July 3, 2022

US milk production growing slowly

During the month of April milk production in the US grew by 0.2% year-on-year (YOY), according to the latest estimates released by the USDA.  Production is now passed its seasonal peak which occurred during March.  Milk production in California, the state which produces the most milk, was still marginally behind last season during the month of April, but the gap is beginning to close.  During March Californian milk production was -3.5%, but April figures show milk flows were just 0.2% behind last season.  Meanwhile the expansion seen in Wisconsin in recent months is slowing.  Output in Wisconsin for April was 1.3% up YOY, whilst the state of New York continues to display strong growth increasing output by 1.7%.  

Analyst comments: Production in the US is now expanding and this trend is expected to continue as profits at the farm level improve.  Dairy commodity prices appear to have peaked and are now easing back but feed prices are falling more quickly.  Milk prices typically peaked in late April and have been trending downwards since this time.  However the forward pricing curve displayed on the CME for Class III and Class IV milk indicates that prices will not fall significantly before the end of the year.  Strong demand in international markets should also assist returns particularly in the states which are more export orientated, such as California.  Corn prices have retreated due to the expectation of a much larger crop in the 2013/14 season.  World Agriculture Supply and Demand Estimates released by the USDA indicate corn prices will be around US$4.70 per bushel in the coming season.  This is significantly below the US$6.90 per bushel estimate for the current season.  This will lead to much improved margins at the farm level and allow the US dairy industry to expand.  This industry has the ability to expand quite rapidly when it is financially viable to do so.  














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