Lower output per cow and drought slowed down milk production in the US. However, domestic demand is projected to increase, which will give the US dairy sector a positive push again. This is stated in the recent ‘Livestock, Dairy, and Poultry Outlook’ from the USDA.
In January, US milk production was 17.6 billion pounds, 2.1% higher than in January 2014. This growth was substantially lower than the December year-over year growth rate of 3.4% and much lower than the peak growth rate of 4.3% in September.
Lower output and milk prices
According to the USDA, slower milk production growth was the result of slower year-over-year growth in output per cow, which fell from 2.3% in December to 1% in January. The year-over-year growth rate in milk cow numbers was 1% in both December and January. Contributing factors for lower yields include declining milk prices relative to feed prices and the ongoing drought in California and other western areas of the country. Although feed prices have generally declined since the second quarter of 2014, milk prices have declined proportionally more since September, resulting in a decrease in the milk-feed ratio from 2.97 in September to 2.09 in January.
2015 milk forecast
Given the January increase in milk cow numbers, the 2015 milk cow forecast is increased in the first half of the year, resulting in an annual forecast of 9,325 thousand head, 5,000 more than forecast last month. Milk production for 2015 is forecast at 211.1 billion pounds, 2.5% higher than the 2014 level of 206.0 billion pounds, but 0.4 billion pounds less than forecast last month.
Reduced exports in dairy products
Given the substantial fall in January exports of dairy products and expectations of strong competition, commercial exports have been reduced from last month's forecast to 10.8 billion pounds on a milk-fat milk-equivalent basis (0.3 billion pounds less) and 37.3 billion pounds on a skim-solids milk-equivalent basis (0.7 billion pounds less). With Russia's ban on dairy products from certain countries scheduled to end in August, exports in the second half of the year are expected to exceed those of the first half.
More US demand for dairy products
Strength in domestic demand is expected to support increased use of dairy products. On a milk-fat basis, domestic commercial disappearance is forecast at 203.1 billion pounds, 3.1% higher than the 2014 level. On a skim-solids basis, domestic commercial disappearance is forecast at 178.4 billion pounds, 4.9% higher than the 2014 level. With a lower milk production forecast, stronger expected domestic use, and price increases that occurred for butter and NDM in February, the 2015 forecast prices for butter and NDM have been increased. However, the price forecasts have been tempered by expected export reductions.