The dairy industry has gone through some good periods of time as well as bad periods of time. Last year showed record high milk prices as both world demand and domestic demand was strong. Other years have seen some low milk prices. Overall, milk production continues to increase despite the swings of market prices. Dairy farmers continue to improve genetics and the use of technology resulting in increased output. Better facilities for cow comfort, feeding efficiency, and overall better management has increased per cow output and replacement heifer availability. This continues to be evident on the monthly milk production reports. Milk production has exceeded the previous year 16 of the past 18 years. In fact, the last time milk production decreased from the previous year on a monthly basis was in December 2013.
With the final results of 2014 having been calculated, those areas that have shown strong growth previously continue to show strong growth. For the month of December, 2014, there were 12 counties that marketed 25% of California and Federal Order milk. All of these were is the West with the exception of one county according to a marketing service bulletin from the Central Marketing Area. Tulare County, CA marketed 6.25% of the total marketings. Merced County, CA marketed 3.40%; Kings County, CA marketed 2.40%; Stanislaus County, CA marketed 2.37%; Kern Country, CA marketed 2.20%; Fresno Country marketed 1.55%; Yakima Country, WA marketed 1.46%; Maricopa, AZ marketed 1.49%; San Jaoquin, CA marketed 1.32%; Lancaster County, PA marketed 1.31%; Weld County, CO marketed 1.20%; and Curry County, NM marketed 1.08% of the milk. So even with the challenges faced in California due to the drought, milk production continues to remain strong. The greatest percentage of milk production gain over the past five years has taken place in Weld County, CO with an increase of nearly 84%.
So will we ever get to a point where milk production will exceed demand? Not with continued growth in demand worldwide. The greatest challenge then becomes competing in the world market. Last year we saw record milk prices due to previously contracted supplies and some shortfalls in milk production in other countries. Many countries are experiencing better production than last year resulting in lower prices. U.S. prices fell from last year’s levels as a response to more available supply, but not as far as world prices. The year has been spent rebuilding domestic inventories to a comfortable level minimizing the need to compete on the world market. However, that will not go on forever.
It is fortunate it is the time of year when demand increases in preparation of looking forward to the holiday and end of the year demand. This should support prices around current levels for the duration. Milk prices are not expected to change much from current levels if current fundamentals remain intact. The real concern will be milk and dairy product prices next year.
- July California Class 4a & 4b prices on August 3
- June Dairy Products report on August 4
- Federal Order July class prices on August 5
- September California Class I price on August 10
- World Agricultural Supply and Demand report on August 12
Robin Schmahl is a commodity broker and owner of AgDairy LLC, a full-service commodity brokerage firm located in Elkhart Lake, Wisconsin. He can be reached at 877-256-3253 or through their website at www.agdairy.com.
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