US dairy: California may lose its lead in dairy

US dairy production was stable in 2022 at 102,7 mt (up 0.1% over 2021), a bit lower in the first half (-0.8%) compared the second half (+1%). “US dairy production has been steadily increasing since 2010, and it should continue to increase, but a little less than in previous years,” said Cassagnou.

The herd is stabilising at around 9.4 million head, with yields rising a little to nearly 11,000 kg of milk per cow per year.

Milk prices also increased by 37% in 2022 compared to 2021 to €536/t.

A historic trade surplus

US dairy exports hit record highs in 2022, up 25% in value at US$10 billion and up 6% in volume. The increase in exports affects all major dairy products (+10% for whey powder, +16% for lactose, +12% for cheeses), and have increased primarily to Mexico (+36% in value to US$2.4 billion) and Canada (+22% in value to US$1.1 billion).

Imports are also up both in value (up 25% to US$5.8 billion) and in volume (up 12%). “This increase in exports compensated for lower domestic demand in 2022,” commented Cassagnou.

Dairy production and herd in the US (source: GEB, Institut de l’Elevage from USDA)

• Production de lait cru = Crude milk production
• Evolution du cheptel = Herd evolution
• 1,000 têtes = 1,000 heads

Early 2023 is marked by a slowdown in the increase in milk production and a fall in the price of milk, which remains historically high. Feed costs remain stable and margins deteriorate for farmers.

“Real uncertainties about the evolution of the herd remain with a herd still slightly increasing at the start of 2023, but an increase in the number of slaughtered cows,” comments Cassagnou, who underlines a different dairy dynamic according to the major production areas (see map).

1. California is marked by a decline that began in 2023 (drought, then floods but also loss of attractiveness and fewer dairy farms) and this region may lose its dairy leadership position.
2. The Great Lakes region is marked by supply management difficulties (the volume of milk produced is on the rise, but processing difficulties due to the lack of manpower).
3. The southern plains are marked by a strong growth dynamic, especially in livestock, with the construction of new mega-dairy farms.

US dairy products exports (source: GEB-Idele from FAS-USDA)

• poudre maigre = lean powder
• poudre de lactosérum = Whey powder
• fromages = Cheese
• lait et produits frais = Milk and fresh products
• peptones et lactalbumines = Peptones and – lactalbumins

What was the supply/demand balance at the start of 2023? “The supply starts to be more important than demand,” comments Cassagnou, who adds that US exports have been disappointing since February 2023 despite a very strong presence of Mexico for purchases, particularly of cheeses.

Forecasts for 2023

• Milk production could slow down in particular due to a decline in livestock. It is estimated at 103.7 mt by the USDA (+1% /2022).
• Lower milk price forecast: -19% at €412/t
• Stronger competition on the export market: back from New Zealand and EU 27
• Still large stocks of dairy products

Distribution of milk production in the US in 2022 (mt) and variation in % in April 2023/2022.