Milk Supply Changes

Published on: 17:37PM Feb 13, 2009
The chart of the week is the annual change in US milk production. This week the USDA lowered their milk production forecast for 2009 by 1.4 billion pounds. Milk production for 2009 is now forecasted to decline .3% from the previous year. If realized it would only mark the 5th such decline since 1990. As I have spoken in previous notes, milk farmer profitability has waned considerably in recent months. Consequently, milk cow slaughter during January is estimated to have been 28% larger than last year. We have not experienced this consistently high milk cow slaughter this decade. So the USDA, and everybody else for that matter, is expecting the number of milk cows to decline as the year progresses. This factor and poor milk per cow yields (due to the poor margins for farmers) are behind the forecasts for a decline in milk output in 2009. In any normal time, an expected annual decline in milk production would be very bullish for milk prices.
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