February 22, 2012

 

US dairy farms may be affected by output hike

 

 

US milk producers has been cautioned to slash herd productions in order to stabilise the profitability of the sector, after a strong start for 2012 left prices at risk.

 

The Milk Producers' Council warned that "problems loom ahead" for the industry after official data showed production rising by 3.4% to 15.8 pounds last month, building on a rise of 1.8% last year.

 

"The amount of milk now being produced, in conjunction with the continuing weakness in fluid milk consumption, very likely will be taken as a negative sign for future milk prices," the MPC's John Kaczor said.

 

Inventories of most major dairy commodities "were growing or were showing signs of growth" at the end of last year. Rising stocks signal less competition among buyers to secure supplies, and lower prices.

 

Producers needed to question whether extra output of some 600 million pounds a month "can be readily sold at prices anywhere close to what is needed to generate milk prices high enough to cover costs of production," Kaczor said.

 

"If those kinds of sales increases are not in the offing - and they are not - producer co-operatives and major milk plants around the country need to immediately apply necessary self-controls to bring about a substantial slowing of milk output."

 

The comments come amid a decline in dairy prices both in the US, where butter values have fallen by 5.3% and whey prices by 8.7% last month according to official data, and abroad.

 

Dairy prices at last week's globalDairyTrade auction, run by New Zealand-based Fonterra, the world's stop exporter, dropped at their fastest rate since July.

 

In Europe, UK farmgate milk prices fell in December for the first time in seven months, albeit remaining, at 29.27p a litre, at a historically high level.

 

US milk giant Dean Foods last week forecast a continued decline in domestic prices through the first quarter of 2012, heralding a period of more stable values.

 

The rise in US milk output reflects investment in herd expansion in the first half of 2011, when rising dairy prices lifted producers' margins.

 

The number of milk cows in America's top 23 dairy states reached 8.5 million heads last month, up 93,000 head on year and 13,000 on month.

 

 Productivity has risen too, thanks to improved techniques and genetics, meaning the average cow produced 21,345 pounds of milk last year, 14.7% more than in 2002.