Jul 24, 2014
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Midwest Milk Production Ramps Up

May 23, 2014

After waning over the long winter, the milk tide is beginning to turn. Could that pressure dairy prices?

By Will Babler and Luke Strub, Atten Babler Commodities LLC

The world is awash in milk production, but this isn’t easy to see if you are a producer in the U.S. Midwest.

USDA recently reported that U.S. milk production increased 1.0% year over year (YOY) in April 2014, to 17.428 million pounds. The April 2014 year-over-year increase was significantly below the 10-year average milk production growth rate of 1.7%.

Recent U.S. milk production growth appears to be even less impressive when compared to international production growth. Record high milk prices have led to significant YOY milk production increases in Europe and New Zealand, with U.S. milk production trailing significantly. Since November 2013, milk production in New Zealand and Europe has increased 8.5% YOY and 4.6% YOY, respectively. Over the same time period, U.S. milk production has increased by only 0.7% YOY.

U.S. milk production has been hampered by lagging production in the Midwest. Poor feed quality and weather conditions have reduced Midwestern production, with Wisconsin, Minnesota, Iowa, and Illinois experiencing an aggregate 2.6% YOY decline in milk production from November 2013-March 2014.

More recently, however, effects of the adverse weather have subsided, with production beginning to shift back toward normal levels. Aggregate milk production in Wisconsin, Minnesota, Iowa, and Illinois was down only 1.0% year over year in April 2014, which was smallest YOY decline in six months. April 2014 month-over-month (MOM) milk production for Wisconsin, Minnesota, Iowa, and Illinois was up 1.1% on a daily average basis vs. a 10-year national average (April to March) increase of 1.2%.