October 22, 2104 — No real surprise in the 4.1% jump in milk production for September, given where we were at last year regarding milk per cow. That’s according to FC Stone dairy economist Bill Brooks, who joined us on today’s DairyLine Radio program to discuss.
“I was looking for 3.6% but knew it could be in the range of 4.0 to 4.2%,” he said.
However, he’s still scratching his head from the strong drop off in cow numbers we had from July to August, even though that is somewhat typical for August. The preliminary September figures show a 2,000 head increase.
“Given the profitability…folks are wondering why there aren’t more cows out there on dairy farms,” he said. “It’s probably do to the rise in slaughter numbers last year and less heifer numbers this year.”
Earlier in the year, before things started taking off, people felt comfortable where the margins were going to be at.
“We did see some additional heifers work their way in to feedlots and slaughter plants… and that’s kind of holding us back on our cow numbers,” he said.
The latest milk production report is the strongest gain we have seen this year, putting us 2.5% above last year’s levels through the end of the year, and perhaps closer to that 4 or 5% range.
We did see a rebound last October in milk production. But our five year average gain for September is only 0.9% and Brooks sees a 1.1% gain for the five year average for the remainder of the year.
“We’re doubling up, if not tripling up where our normal percentage gains have been at for the fourth quarter, or at least it looks like we’re setting ourselves up for that,” he said.
Not only our U.S. producers increasing production, but we are seeing more milk throughout the world, particularly in New Zealand, Australia and Europe.
“Everybody’s producing a lot more milk and we’re working our way to the same situation that we have in the grains and oilseeds,” he said. “Something dairy producers are pleased about because of the lower cost feed ingredients, but we’re working our way towards that on the milk side.”
We’ve seen international prices drop off and some commodities domestically drop off, nonfat dry milk being the largest decline up until we saw the butter price crash the last few weeks. At the moment, butter is recording a little bit of a correction and cheese is holding with a fairly decent price, although barrels have been exhibiting a lot of weakness.
“Partly due to the time of year where folks are sourcing their product for the holiday season – a lot of products have been shipped and that’s helping support cheese and butter prices,” he said. “But eventually their going to get caught up in the same kind of market move that we have seen on the nonfat dry milk side.”
Brooks says it won’t be surprising that all of our dairy commodities will be back down below the $2.00 level by the end of the year.
“Dairy producers will be looking at less revenue for their milk but fortunately looking at a lot lower input costs and profitability is expected to be fairly decent into 2015,” he concluded.