Much of the news for dairy producers has seemed negative of late, but a few factors are beginning to point toward slower milk production, at least in Oceania and the United States.
Looking to the Southern Hemisphere first, the latest milk production results for Australia show that the country posted its largest year-over-year decline of 2015 in November, according to Dairy Australia. Australia’s November milk production plunged 3.4 percent, compared with November 2014 output.
“Lower year-over-year output in Australia was driven by a 5.3 percent reduction in milk production in Victoria, the country’s largest milk-producing region, and was due to dry weather conditions,” says Mary Ledman, dairy economist with the Daily Dairy Report and president of Keough Ledman Associates Inc., Libertyville, Ill.
Dry weather in Australia is being blamed at least partially on El Niño, which the National Oceanic and Atmospheric Administration now says is tied with the 1997-98 event as being the strongest on record.
Milk production in New Zealand is also lower, but it hasn’t dropped as much as earlier anticipated. December output in New Zealand of 2.765 million metric tons (6.1 billion pounds) fell 1.6 percent below the previous year, according to a recent release from the Dairy Companies Association of New Zealand.
The decline puts season-to-date production in New Zealand 2.8 below the previous season. Given the recent data, the milk production deficit in the 2015-16 season is unlikely to be as large earlier estimates, according to Daily Dairy Report analysts, but it is nevertheless a decline. Earlier this year, Fonterra, New Zealand's largest dairy cooperative, called for a 6-percent season-over-season decline.
A number of factors are weighing on New Zealand milk production: farm-gate milk prices have hit nine-year lows, producers continue to struggle with heavy debt loads, and strong beef prices have encouraged more slaughter.
Dairy cow slaughter has also been high in the United States, says Ledman. USDA’s latest Livestock Slaughter report, showed producers sent 254,800 dairy cows to slaughter in December. “That’s a 7.1-percent increase from November on a daily average basis but 2,000 head less than December 2015,” she notes.
For all of 2015, producers sent 2.914 dairy cows to slaughter—98,500 more than in 2014.
“Regionally, slaughter rates were mixed across the United States,” notes Ledman. Federal slaughter regions 7, 9, and 10, which include Texas, New Mexico, Arizona, California, Idaho, Oregon, and Washington, culled 117,300 head more in 2015 compared to 2014, Ledman notes. Conversely, 2015 slaughter in region 5—Indiana, Wisconsin, Minnesota, and Michigan—trailed the prior year by 61,600 head.
“Slaughter rates could increase over the next few months in the Southwest as the impact of winter storm Goliath becomes more evident in Texas and New Mexico,” says Ledman. “And if heavy rains persist on the West Coast, slaughter could pick up there as well. While that is bad news for producers affected by these adverse weather events, a smaller national herd both here and in Oceania will help offset the large production gains we are seeing in Europe now that quota has been eliminated.”