December 21, 2023


Global dairy demand remains strong, but milk production faces challenges


The global dairy industry is grappling with a contraction in milk production even as demand remains robust, according to insights shared by dairy analyst Dustin Winston during the University of Idaho Ag Outlook Seminar, Capital Press reported.


Various factors are contributing to the production challenges, including weather conditions affecting Australia and the European Union. Additionally, Oceania and Europe are grappling with the impact of new environmental regulations, posing obstacles to production growth in these regions.


In the United States, US Department of Agriculture (USDA) data indicates that milk production has been below year-earlier levels from July through November. Dairy cow slaughter rates, initially robust, have seen a significant slowdown in recent months, laying the groundwork for slower production growth.


Winston emphasises the need to maintain low slaughter levels to meet the additional processing capacity anticipated in late 2024 and into 2025. But growing the herd is a time-consuming process as dairy farmers have been culling cows faster than they can be replaced. The decline in the US herd over the last few months, as reported by USDA, indicates a shortage of replacement heifers.


While feed costs have seen a decline, making a modest improvement in the gross margin, Winston notes that it is currently expensive to buy replacement heifers. He anticipates further improvements in margins in 2024, given the expected stability in feed costs globally.


The Class III milk price is on the rise, hovering around US$18 to US$18.50 per hundredweight in the futures market. With additional components, Idaho, US milk prices range from US$21 to US$22 per hundredweight.


Looking ahead to 2024, Winston expects a potential bidding war on milk as supply remains slightly short, and new processing capacity comes online. Domestic demand has remained steady, and foreign buyers are likely to turn to the US due to competitive prices in the global market.


-      Capital Press

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