Dairy sector under pressureDairy sector under pressure
Milk prices continue to plummet as dairy producers expand herds.
March 6, 2018
Dairy markets have been under some pressure over the last couple of weeks, according to David Williams, director of global protein for Informa Economics IEG.
“Processors are a little bit concerned with prices, but demand seems to be staying steady, so further processors are doing quite well here in the short term,” he said. “They’re still building up for the heavy demand season of cheese and butter that will happen in the back half of the year.”
Milk producers, on the other hand, are under tremendous burden, Williams said, “and that only continues to be seen.”
He said Dean Foods recently announced major cutbacks and noted that its milk processing margins continue to collapse.
“There is too much milk out on the market. Dairy producers have expanded their herd, and their efficiencies are up this year again, so milk prices have just continued to plummet,” Williams explained.
The most recent “Milk Production” report from the U.S. Department of Agriculture showed that milk production in the 23 major states during January totaled 17.3 billion lb., a 1.8% increase from January 2017.
Production per cow averaged 1,979 lb. for January, 24 lb. above January 2017. This is the highest production per cow for the month of January since the 23-state series began in 2003, USDA noted.
The number of milk cows on farms in the 23 states was 8.74 million head, 49,000 head more than January 2017 and 4,000 head more than December 2017.
Williams said producer margins are now under $9/cwt., which is below breakeven.
Globally, the European Union, Australia and New Zealand also continue to increase production in the 1-3% range, he said, adding, “They have more supply, and they’re putting more pressure on the market to find new outlets for their product, too.”
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