September 25, 2009

The recovery of low milk prices is dependent on a slowdown in milk production, which is finally starting to happen, according to an expert with the University of Wisconsin Cooperative Extension.

A September 18 milk production report indicated the first year-on-year downward trend for quite some time in US milk production, said Dr. Bob Cropp in his monthly Dairy Situation and Outlook report.

The latest USDA figures showed that total milk production for July and August were down, while dairy cow slaughter increased.

Milk production continues to decline in the West and increase in the Midwest and some Northeast states, said Cropp.

Cow numbers are down 3.5 percent on-year in California, and with milk per cow 1.1-percent lower, total milk production was 4.5 percent, he said.

Production and herd numbers were also lower in Idaho, Arizona and New Mexico. Wisconsin had 3.7-percent more milk production from 0.4-percent more cows. Minnesota's herd grew less than one percent and milk output was up 4.4 percent.

Cropp also said there may be improvement in domestic milk and dairy product sales to support the price recovery.

Recent data indicates that dairy product sales are improving and are running above year-ago levels, and some food services have came up with new food items that use increased amounts of dairy products, he said.

Retail prices have continued to drop which will also help sales. Compared to a year ago, retail prices for all dairy products in August was 18-percent lower, the lowest in two years.

Meanwhile, USDA's latest price outlook shows the recovery in milk prices to be a slow process but Cropp is more optimistic.

Still, in order for prices to go higher more quickly, milk production must decline into 2010 and domestic sales must show improvement, Cropp concluded.