‘Eat Mor Cheez’: Dairy cows hope you’ll consume more milk in 2016

When there’s more milk than market, dairy farmers start to get anxious.
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And the cows in the dairies? Well, they may be ready to start a full-scale marketing campaign to get Americans to “Eat Mor Cheez.”

There are a lot of factors that go into the prices farmers receive for their milk beyond supply and demand. That’s just the beginning.

According to recent U.S. Department of Agriculture reports, both domestically and worldwide, dairy production is steadily rising, yet fluid milk consumption is not quite keeping pace. And that means average prices are dropping at the farm gate.

The USDA’s Economic Research Service released its Livestock, Dairy and Poultry Outlook May 16, which looked at the production forecasts for 2017 from the May 10 World Agricultural Supply and Demand  Estimates. USDA shows that we have about 9.3 million milk cows in the United States. The WASDE report forecast milk production for the remainder of 2016 to be higher than in April, considering that cow inventory has expanded slightly and the growth in milk per cow during the first half of the year is forecast to be higher.

The WASDE report also forecast production of all animal proteins is expected to rise in 2017, with milk production increasing 1.6 percent. According to USDA’s analysis, domestic production will be 215.2 billion pounds.

“Milk production for 2017 is forecast higher as improved forage availability and continued favorable feed costs are expected to support gains in milk per cow,” the report stated. “Cow numbers are expected to remain near 2016 levels.” That tracks with what dairy farmers are experiencing in the High Plains. Stephanie Eckroat, executive director of Kansas Dairy, said she’s seen production up in Kansas and across the U.S.

On the demand side, dairymen are seeing overall domestic dairy consumption declining. USDA reports from the National Agricultural Statistics Service show that fluid milk consumption on a per capita basis has dropped from 196 pounds per person in 2000, to 159 pounds per person in 2014-2015. However, yogurt consumption is rising from just 6.5 pounds per person in 2000 to 14.9 pounds per person in 2014-2015. Cheese and butter consumption is rising as well, which is good news for dairy farmers like Lynda Foster.

Foster is co-owner of Foster Dairy, Fort Scott, Kansas, with her husband, Gary, and their son, David, and his wife, Addi. She said thankfully domestic demand for cheese is growing some here, even though Americans still aren’t quite meeting the goal of getting three servings of dairy a day.

“Consumption of cheese is up, yogurt some,” she said. “But there aren’t as many fluid pounds being consumed.” Flavored milks are actually leading the category as well as whole milk, rather than skim, she said. Consumers, it seems, are returning to consuming healthy dairy fats as part of their diets. While fluid milk consumption is slowing, the drop is not quite as dramatic as it would be if processors weren’t looking to innovative new products for the dairy cases to attract consumers.

Still, with larger supplies available, cheese, butter and non-fat dry milk prices are expected to be lower in the short term while whey prices should rise. This means both Class III and Class IV prices will be reduced this year, with milk prices forecast to be $14.60 to $15.10 per hundredweight. USDA says this is a reduction of about $0.40 per hundredweight from last month’s forecast. It’s also down from the high of $24 per hundredweight on average paid in just 2014.

Foster said the slowing export demand is really what’s hurting U.S. dairy farmers’ average prices right now. She cited the value of the U.S. dollar and changes in world supplies as reasons why the U.S. has lower exports.

“The demand for exports isn’t there because Russia quit buying and China hasn’t bought as much from us because the EU has excess production that they are exporting,” she said.

However, there are some bright spots in the future dairy price outlook, coming from the export side. USDA estimates that as the summer comes around and hotter and drier weather naturally brings about lower production numbers, there will be tighter expected world supplies. That, coupled with higher global demand, should bring about an increase in U.S. dairy exports in 2017. USDA is forecasting the all-milk prices to be $15.25 to $16.25 per hundredweight in 2017.

But how will dairy farmers maintain the gap in their margins until those prices rebound in the next year or so? Foster said for many it will be a return to looking at making their operations as efficient as possible, even if they think they’ve already managed that goal.

“On the farm side, since 2009 when we went through such terrible milk prices and high feed costs, when it cost more to milk the cows that what we were paid, dairy farmers have learned to tighten their belts and we all got efficient,” she explained. Right now, she added, the margin of profit is still there for some dairy farmers but has greatly narrowed for others. So farmers like her family would normally choose to cull some cows and look at fine-tuning the feed ration to get more efficient.

“But most people, if they were going to cull cows, already have done so,” she explained. “If that cow is still making money and the farmer still has payments to make on equipment or facilities, then he’ll likely keep her. He has to have cash flow, and if the cow is still putting out milk then he’s going to keep her.”

Eckroat agreed, saying that dairy farmers tended to keep cows in the herd when prices were higher in the last couple of years and they might be getting to the point where they start to revisit their herd culling metrics.

“The milk price dropping isn’t great, but at least feed is at decent prices,” Foster added. However, feed costs are starting to inch up, further narrowing that profit margin for dairy farmers. Making sure that commodities a farm needs are being booked ahead so the farm can capture those discounts is another way to help. However, pulling back on feed for a herd just to try to save some money really throws a wrench in the overall milk output and can actually be more detrimental to the farm, she cautioned.

What can help is the upcoming summer months, when typically dairy herds start to slow down a bit in milk production because of heat, drought and other weather factors that can affect cows. That curb in production might raise prices at the farm gate.

One thing for sure that can help dairy prices is increased consumption of milk and dairy products by American consumers, Foster and Eckroat agreed. Everyone could stand to follow some advice from dairy cows across the U.S. and be sure to “Eat Mor Dairy Products, Pleez.”

Source: HPJ

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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