California’s shift to the federal milk marketing order and volatile economic challenges within the dairy industry have created a landscape in which some producers are thriving while others fight for survival.

For producers on the front lines of the dairy industry, those whose milk flows from the farm into the production lines for cheese, fluid milk, butter and other products, the financial outlook hinges largely on the end product.

Under a system which now ties prices largely to end product pricing rather than pool pricing all milk, producers who ship their milk to plants which produce cheese are receiving significantly higher prices than those whose milk goes to butter and powder production.

The difference, Western United Dairies CEO Anja Raudabaugh recently told Mattos Newspapers, is stark.

“I have some dairy producers who year over year have been having the best year of their entire career,” Raudabaugh explained. “Half of my members are absolutely having the best year they have ever seen.”

But others, she said, are facing existential challenges.

“It has not been unusual for (a producer) to be making 50 percent less than their neighbor right now,” said Raudabaugh.

She estimated that the average pay to a dairy producer shipping to a cheese plant is more than $20 per 100 pounds of milk, while the average for a producer shipping to a butter/powder plant is in the range of $11 to $12.

The average break-even cost for a California dairy producer, Raudabaugh said, falls in the $16 to $17 range.

The state’s dairy producers entered into the federal milk marketing order in 2018, she said, drastically changing the pricing structure.

Without diving too deeply into the complexities of the milk pricing system, Raudabaugh explained that “broadly speaking, all milk was pooled and the average price was paid out to producers. Everybody basically got paid the same” under the previous structure.

Under the federal order, processors have more flexibility in how they pay their producers, and the format has largely shifted to an end product pricing system.

“Cheese plants have paid their producers what they have reaped off the market. The market for cheese has been good,” Raudabaugh explained.

At the other end of the spectrum, though, are the butter/powder processors. While butter has long been a “golden” dairy commodity, she said, its dry milk powder by-product is at the lowest rung on the pricing scale of dairy products.

“The producer who is making milk for a butter/powder plant gets the average of those two products,” Raudabaugh stated.

Cooperatives which have processing capability for both Class III (cheese) and Class IV (butter/powder) plants have the flexibility to pool or de-pool all or part of their milk, she noted, which maximizes the plant’s ability to make a profitable product for its farmers.

“The synopsis is that in California our producers’ ability to survive in the future depends on how well their processor plays the pool game. If they are really adept at it, they will have a competitive edge.”

Other financial challenges have also come into play.

The cost of feed has skyrocketed in the past year, she noted, and has been exacerbated by dry conditions in California which have limited the ability of Golden State producers to grow their own commodities.

“Feed prices have been terrible,” Raudabaugh remarked. “If you didn’t have your feed hedged and were trying to buy rolled corn on the market you paid mightily for that.”

Labor costs are also a concern, particularly in the local market where dairy producers are competing with other employers for workers.

Dairy producers in some areas, she said, are paying $18 to $20 an hour to hire employees “because they are right next door to urban construction projects” competing for labor.

Some processors have reportedly taken measures to enforce limits or asking producers to cut back the amount of milk they are shipping.

“Mostly what I hear is that cooperatives are simply trying to enforce their base with members,” she explained. But, Raudabaugh noted, she has also heard reports that two private processors have asked for milk cutbacks from their shippers, one last April and another recently.

While demand for dairy products remains strong, she said, “right now across the United States there is a massive over-supply of milk being produced. In California the numbers are not quite as stark, but we are probably producing 2-3 percent more year over year.”

While California is fortunate to have a very high manufacturing capacity, Raudabaugh said, if the rest of the nation is overflowing with milk it is only a matter of time before California is impacted.

Creameries, she explained, must strike a balance to avoid creating a surplus of high-value commodities such as cheese and butter, which would ultimately diminish returns to producers. “Processing milk for higher value products is one pressure point – (which) combined with contracting the supply of that higher value product creates a better balance for farmers,” Raudabaugh explained.

Pandemic relief funds were crucial in helping struggling dairy producers survive the past year, Raudabaugh said. She encouraged those who could to invest those funds into strengthening their operations through measures such as hedging feed costs and base milk prices. For others, the payments went directly to staying afloat.

“The payments have been put to good use. People who didn’t really need the money, I’ve seen reinvest to prevent disaster later. It wasn’t necessarily needed in half the cases, but the other half used it to buy feed,” Raudabaugh commented. “It has been the only thing preventing bankruptcy in a lot of cases.”

Increasingly, Raudabaugh added, she is encouraging producers to lock in as many of their costs as possible through hedging.

The current situation, she told Mattos Newspapers, is not sustainable for producers who are shipping to butter/powder plants.

“Dairymen in California are used to having a good year, a bad year, a good year a bad year. They went to the federal order because they wanted to see stability. That is not going to happen,” Raudabaugh said. “In the past, everybody was on the same playing field. If you were a producer you knew what you were going to make your neighbor was going to make the same. Now there are winners and losers.”

Source: westsideconnect.com

The first white revolution in the 1970s turned India from a milk deficit country to a milk sufficient one. India has been the largest milk-producing nation in the world since the past two decades. India tops the list in milk production due to a high cattle population despite low milk productivity. 

One of the bottlenecks hindering growth for milk productivity is the lack of a technology-based system of production in rural areas. Eighty percent of Indian cattle are owned by farmers with a herd size of up to four animals with little automation and infrastructure. Moreover, poor genetics of the herd leads to low milk productivity. 

Parallel to these supply-side challenges; India is slated to witness a boom in dairy demand. Demand for milk is growing at 6% annually in India but supply is growing at 4%. In order to meet the increasing demand for milk and ensure that India is self-dependent on milk production, there needs to be more productivity. Hence there is a need for a second white revolution. The gap between this supply and demand can be addressed by adopting innovative dairy farming practices. 

Just as in the first milk revolution, this time around too the growth in productivity will be driven by small-scale farmers. Marginal farmers, however, are seeing lower returns from milk produced from their animals. In order to increase overall milk productivity and support rural dairy farmers, the milk yield per animal needs to increase. This can only be achieved through policies suitable to agro-climatic conditions and the needs of local farmers. Major producers like the USA and European Union experienced booms in productivity through genomic breeding interventions. Rearing a large number of animals creates high pressure on our resources and environment and is not a sustainable model. The solution is increased milk productivity through scientifically advanced breeding. 

A second white revolution in India is the need of the hour not just to increase milk supply but to usher economic growth in the rural sector, double farmer income, and ensure a more environmentally sustainable model for dairy production. A major part of this revolution will be driven by technology-based solutions. 

The first challenge in raising productivity for doubling rural farmer income is to increase the coverage of Artificial Insemination (AI) Services from a low level of 30% to 75%. National Dairy Program, a world bank-assisted program has been a major initiative for genetic improvement through progeny selection and progeny testing. This will give a boost to the productivity of current non-descript cattle and double milk production in the next two to three years. AI technology is low hanging fruit and continuing this for the next few years will be able to double or even triple milk production in the country. 

Other more expensive technologies such as IVF (In Vitro Fertilization) embryos from high merit germplasm can assure 100% genetic gains to assure farmers of future revenue and increase productivity in the next generation of cattle. Sexed embryos manufactured from sorted semen can ensure a female calf which has a higher monetary value for the farmer. The industrial-scale of production of such technologies will lead to further affordability of such technologies. 

TBG (Tropical Bovine Genetics), a brand under TAG (Tropical Animal Genetics) was setup with the single purpose of ushering in the second milk revolution in India through the use of groundbreaking science and technology. Our goal is to double rural farmer income. 

Our indigenously developed In Vitro Breeding Platform (IVBP) allows for the breeding of bovine animals with the desired traits and characteristics at a cellular level. This paves the way for innovative products such as sexed semen, high merit semen for use in advanced artificial insemination. The IVF embryo technology offers assured genetics. Currently, TBG is working on a radically new technology known as Pregnancy Free Lactation (PFL) technology that allows cows to lactate without the need for pregnancy.   

About TAG

Tropical Animal Genetics Pvt. Ltd. (“TAG”) is a bovine-assisted reproductive technology company. We have partnered with Trans Ova Genetics, USA (a leading cattle reproductive biotechnology company from USA) and with NDDB Dairy Services (NDS) to promote better genetics in Indian Bovine industry. We are working towards increasing per capita productivity of milk in bovines and conserving threatened Indian breeds of cattle. Our cutting-edge research in the field of sperm sorting and embryo management will enable us to provide the best of technology to the livestock farming community. We are managing a fully equipped IVF lab with rated production capacity of 100K embryos per year. We are creating a network of cattle I.V.F. labs for industrial scale production of embryos in the country. We have research facilities in Bengaluru, Karnataka and animal farm in Karnal, Haryana. 

The coronavirus pandemic caused 2020 to be an unprecedented year for most industries, including dairy producers.

But Mark Stephenson, dairy policy analyst at the University of Wisconsin-Madison, said you would never know it just by looking at Wisconsin’s total milk production for the year.

“You couldn’t pick 2020 out of that set of trends as being an unusual year in any way at all,” Stephenson said. “But it was a very abnormal year. The way we got there was through some pretty rigorous changes.”

According to data from the U.S. Department of Agriculture, Wisconsin’s milk production has been increasing each year since 2004 and has been setting a new annual record since 2009. 

Last year was no exception, with the state’s dairy farms increasing total production by just under half of a percent to 30.7 billion pounds of milk.

Stephenson said the year’s total growth is thanks to a comeback that started in the latter part of 2020 and has continued into this year.

After milk prices plummeted at the start of the pandemic and a few farms were forced to dump their milk, Stephenson said dairy plants and cooperatives tapped the breaks on milk production by implementing base/excess programs, where farmers get less money for extra milk beyond their usual production level.

“Farms slowed down, you could see that very clearly. Both the number of animals dropped and milk production per cow declined,” Stephenson said. “And then two months later, we had a record-high cheese price, and we’re back on and needing to fill orders for things.”

Stephenson said much of this new demand came from pandemic-related food assistance programs by the federal government. But he said dairy exports also picked up in 2020, leading some farms to add cows to their herd and dial up production per cow through management strategies. 

Stephenson said this growth was also made easy by a good growing year for feed crops in 2020.

“That’s kind of led us to where we are now, with pretty strong milk production and unsurety, I think, about just how strong milk prices may stay this year,” Stephenson said.

Stephenson said he’s been concerned with how quickly producers have rushed to increase milk production without knowing how the industry and the country will recover from the pandemic.

But some dairy cooperatives in the state are still playing it safe because they haven’t seen local demand for milk return.

Mick Homb, director of milk marketing for FarmFirst Dairy Cooperative in Madison, said it was almost a year ago that his phone first started ringing off the hook with dairy plants wanting to scale back on how much milk they were buying. That forced the cooperative to put in place their own limits on milk production.

“We asked our farmers that if they were going to increase (production) above 3 percent, that they needed to call us and get permission in order to do that,” Homb said. “I think they learned early on that we were going to have way more milk than what we were going to be able to sell, and we were going to be in for a lot of months of having to sell distress milk (at a lower price) to make sure we didn’t have to dump any milk.”

A year later, Homb said FarmFirst still has that policy in place because they’re still having to sell some milk below market price.

He said many small cheese plants in the state have gone from being steady consumers to buying milk sporadically because they’re struggling to move their own inventory.

“It seems like instead of planning for the future, two to three months in advance…they’re only reaching out a week or two. Because with everything going on, you just don’t know where it’s going from here. And I think that has changed the landscape of how people plan and produce and predict what they’re going to do,” Homb said.

But Homb said he knows many dairy farmers are looking for ways to grow their production in 2021. He started getting calls last month from producers hoping to join the cooperative after their milk buyer told them they wouldn’t take on more milk.

“I have not taken on any new farmers in over a year and still can’t because how can you take new milk on when you’re still selling milk at distressed prices?” Homb said. “I think it’s gotten better but from who I talk to and listen to, I think everybody is still trying to get rid of some of their milk.”

Stephenson said almost all milk cooperatives in the state are having similar debates as they think about the months ahead.

“We’ve got to be prepared to tap on the brakes a little bit and slow down. That’s on the horizon,” Stephenson said. “We don’t want to be in the situation that we were in last year when we hit the brakes pretty hard and then all of a sudden discovered this new demand for cheese needed for food box programs. We’d like to be able to meet the need in a more steady and uniform way.”

Source: Wisconsin Public Radio

Across Wisconsin signage is popping up on people’s lawns, both in the city and in rural areas, urging folks to support the state’s dairy industry. To rally support for Wisconsin’s dairy industry – crippled by the coronavirus pandemic – FFA organizations and other agricultural groups are using the signs to not only promote the state’s signature industry, but to generate funds to purchase dairy products.

Show your love and support for Wisconsin dairy farmers while reminding consumers to buy real Wisconsin dairy products.  Order your sign early and proudly display it to your community. Encourage your farming friends and dairy industry-engaged partners to showcase these signs in high impact, well-travelled areas. Limited quantities are available so submit your order early as all requests must be received by April 1. Signs will be shipping in early May 2021.

Request Yard Signs HERE

From carbon neutral and pasture fed to hand selected and secret ingredients, when it comes to branded fresh meat and dairy in Australia, there’s a promise to meet every need or taste.

So a little white milk brand hailing from the heart of dairying country would need to be rather avant-garde to catch the attention of a consumer spoiled for choice and quality.

Gippsland Jersey’s founders probably weren’t really aiming for that. More likely, they were just trying to find a way forward amid a farmgate milk crisis and personal tragedy.

Fourth generation dairy farmer Steve Ronalds was laid up in hospital following a motorbike accident when Murray Goulburn retrospectively cut its farmgate price five years ago. Only a few weeks earlier, Sallie Jones’ father had taken his life on the family dairy.

And so Gippsland Jersey was forged on three pillars: a fair price paid to the farmer, raising awareness of mental health and random acts of kindness.

The last one has equated to everything from relief milkers to a bed for a farmer who was sleeping on the floor.

A cent from every litre processed at Gippsland Jersey’s Lakes Entrance factory, on Ms Jones’ family farm, is put aside for the ‘random acts’ fund.

Meanwhile, every year the little company makes a calendar featuring brave farmers sharing their story of dealing with challenges. Gippsland Health Service chips in with printing costs and all the big milk companies have come on board to deliver it to every dairy farmer in Gippsland.

The calendar hangs on milk room walls, complete with help lines for mental health, information and inspiring words from fellow farmers.

Big things from little steps

Mr Ronalds has worked on a number of dairy farms, as well as off-farm for processors in their milk supply teams. He and his wife sharefarmed, leased and then purchased his family’s farm, Jinaldi, around 100 kilometres east of Melbourne.

With another share farmer Brenton Ziero, they today milk 400 Jerseys off 160 hectares and Gippsland Jersey takes 85 per cent of the milk.

The rest is on-sold to other small manufacturers or big processors.

Mr Rolands said the retrospective price clawback left many milk producers like himself on their knees.

“In hospital I was thinking about the limited opportunities for Australians to buy Australian-owned milk, while at the same time Australian dairy farmers were being crippled,” he said.

“The answer had to be getting our milk in our own bottles.”

The business partners found a contract processor and three months later Gippsland Jersey began.

“One thing we’d noticed with other small dairy companies was that they would be milking the cows, then processing, then trying to deliver it and then find new customers on top of all that,” Mr Rolands said.

“Instead, we decided to focus on building the brand. We’ve had to make the most of every opportunity that has come our way and make our own opportunities as well.”

The three pillars proved a hit and distribution quickly covered all of Gippsland and into metro Melbourne.

Hurdles

Then came a major challenge – the contract processor could not long accommodate them.

It proved impossible to find somewhere new close enough to be viable.

The solution: “We asked customers to pre-purchase the milk and raised $110,000 and built our own factory,” Mr Rolands said.

It was done on the smell of an oily rag, with a lot of help from friends and family. They even offered tourists free accommodation if they helped out with labour for a few hours.

The factory has been processing for 12 months now: three different varieties of white milk, soft serve ice cream, butter and buttermilk and cream.

It processes around 50,000 litres a week. Alongside Jinaldi, two other other family farms supply the brand and a fourth is currently being sought.

The backbone of the business has been family shops and cafes, Mr Rolands said.

But Gippsland Jersey products are now in niche stores, high-end restaurants where the story is included on menus, independent supermarkets and 60 Woolworths stores.

Year-on-year growth has been around the 70pc level.

The white milk retails in both one and two litre bottles, for between $4.70 and $7 for two litres.

Mr Rolands said key to smaller Australian dairy companies working was support from bigger processors willing to take the balance of milk from farms.

It hadn’t been an easy road, he said.

“But we know we’ve made positive changes in this industry and lives have literally been saved,” he said.

Source: queenslandcountrylife.com.au

Wisconsin now has less than 7 thousand dairy farms but those that are still in operation are turning out a lot of milk. Final figures for 2020 show milk production in the state set a new record for the year at 30.7 billion pounds—up from 30.6 in 2019. The reason was more milk per cow since there were about 2,000 fewer cows in the herd last year. Production per cow averaged 24,408 pounds last year—up 256 pounds from 2019.

Farm Service Agency officials say there are still a lot of farms across the country that haven’t enrolled the Ag Risk Coverage and Price Loss Coverage safety net programs for this year. The deadline to enroll is next Monday March 15th and so far only about 1.3 million or 81% of the eligible farms have signed up. Agency officials figure there are right around 2.3 million farms eligible for the programs.

Agriculture Secretary Tom Vilsack recently met with the agricultural leaders from Mexico and Canada. He and Mexico’s Secretary of Agriculture talked about climate change and food security. His discussions with Canada’s Ag Minister focused on climate smart food production, forestry practices and finding science based solutions to reduce climate change. Reports say there was not much conversation over trade issues, like dairy with Canada and fruit and vegetable trade with Mexico.

The Wisconsin Department of Agriculture, Trade and Consumer Protection has some grant money they want to give out to Specialty Crop producers. The 3 year grants, ranging in size from ten thousand to 100 thousand dollars, are for projects that would enhance the competitiveness of specialty crops through research, education or market development. Crops included would be fruits, vegetables, tree nuts, nursery crops, herbs and others. Applications are due at DATCP by April 2nd with the projects to begin later this fall.

Two dairy judging teams from the UW-River Falls recently swept the 2021 Midwest Regional Dairy Challenge. The virtual contest featured 19 teams that were given the situation on a Midwest dairy farm and then asked to identify strengths of the farm and offer solutions for some of the weaker areas of that farm. The River falls teams are coached by Dr. Sylvia Kehoe.

Source: weau.com

Environmentalists and animal welfare groups formed a coalition to ban permitting of large, industrial-sized dairies in Oregon, and they’re making headway in the Oregon Legislature.

A bill to halt permitting of mega-dairies—those 2,500 cows or more—has been introduced in the Oregon Legislature. It would prevent the state departments of Agriculture and Environmental Quality from issuing or renewing licenses for large dairies.

The coalition wants mega-dairies regulated like heavy industrial companies and forced to comply with environmental and animal welfare laws to curb pollution and add more regulations to the diary industry.

Supporters say larger farms are able to be more efficient with resources while driving down costs to consumers.   One study points to American diaries as being among the most efficient in the world.

The dairy farming in Oregon is a $1 billion industry.

By Oregon Family Farm Association,

“She is the linchpin of dairy farm sustainability,” says Ken McCarty, owner of McCarty Family Farms and MVP Dairy. Listen to Ken talk about the dairy cow’s vital role in sustainability and learn more about MVP’s commitment to environmental stewardship.

The Royal Association of British Dairy Farmers (RABDF) is urging dairy producers to sign up for the pilot of the Sustainable Farming Incentive, one of three schemes that will make up the Environment Land Management Scheme (ELMS).

The UK Government is seeking “several hundred” farmers to take part in the pilot with expressions of interest opening from Monday 15 March. The scheme will then be rolled out in 2022, which will initially be available to Basic Payment Scheme recipients.

The Sustainable Farming Incentive is the first of three schemes to be piloted and co-designed. It will replace the Basic Payment Scheme and instead reward farmers and land managers for sustainable farming practices.

Further information on the other two schemes, Local Nature Recovery and Landscape Recovery, will be shared by the UK government later this year.

The schemes will operate together and pay for sustainable farming practices, improve animal health and welfare, improve environmental outcomes, and reduce carbon emissions.

The piloting and implementation of the three future schemes will be funded by gradual reductions in BPS payments from 2021 to 2027.

The Sustainable Farming Incentive will support approaches to farming that deliver for the environment, such as actions to improve soil health, hedgerows and integrated pest management.

The pilot will build on the success of the ongoing programme of tests and trials, which already involve over 3,000 farmers and other land managers. Tests and trials focus on trying out individual parts of the future scheme, like land management plans or different payment methods – whereas the pilot will test a working version of the scheme from start to finish.

RABDF Managing Director Matt Knight encourages dairy farmers to look at the pilot and sign-up. “The pilot must contain a mix of farm types and as such, we must have a fair number of dairy farmers from a mix of different systems represented.

“I would encourage everyone to look at the details of the Sustainable Farming Incentive and sign up for the pilot. This is our one chance to help shape how future support payments will work.”

Environment Secretary George Eustice added: “The ethos at the heart of our future policy is to support the choices of individual farm enterprises.

“The Sustainable Farming Incentive will support the environment and promote animal welfare. It will reward approaches to farm husbandry such as encouraging integrated pest management, improving soil health and enhancing hedgerows.

“Assets that were previously dubbed “ineligible features” will finally have their value recognised and rewarded. I would encourage farmers to engage in this pilot to help us design the new scheme,” he said.

How the pilot will work

Farmers will need to complete a short, simple online form to submit expressions of interest in taking part in the Sustainable Farming Incentive pilot.

Successful candidates will then be invited to complete their application and, if eligible, they will enter into a pilot agreement starting from October 2021. This initial stage will be open to several hundred farmers, reflecting England’s distribution of farm types and locations.

Pilot participants will be asked to take part in a range of co-design activities, providing rapid feedback on their experience of all aspects of the process – from pre-application to implementing their agreements. This will ensure the scheme is fully workable and user-friendly once fully rolled out from 2024.

Click here for more information.

America’s Dairyland stayed true to its name last year as the state set another record for total milk production, despite having less cows. The latest government figures from the USDA confirmed that Wisconsin farms produced 30.7 billion pounds of milk in 2020, just less than one-percent more than the previous record of 30.6 billion harvested in 2019.

Milk per cow also rose to an all-time high of 24,408 pounds, up 256 pounds from the year earlier.

The total number of milk cows at year’s end was around 1.26 million head–approximately 2,000 less than the previous year.

As of January 1, there were 6,932 licensed milking herds in the state. That was 360 less than the same time in early 2020.

The long-term trajectory for U.S. dairy exports remains distinctly positive with growing demand around the world for dairy products, particularly of U.S. origin, despite pandemic-induced uncertainty to persist into 2021. 

In spite of the pandemic, in spite of shipping issues, and in spite of historic price volatility in the cheese market, U.S. dairy exports in 2020 achieved:

• A record in milk solids equivalent (MSE) volume of 2.1 million metric tons (MT);
• The highest year of value since 2014 ($6.6 billion); and
• The highest percent of U.S. milk production exported since the Next 5 Percent plan began (16.0%).

More information, data and charts on specific products and markets can be found here.

Despite a 1.1% decline in export MSE volume in the month of December, U.S. dairy capped off a strong 2020 for exports. As we have outlined over the past several months, there have been crucial reasons for strong growth in 2020:

• Whey exports (+24%, +107,013 MT) benefitted immensely from China’s market reopening following the Phase I agreement and exemption for permeate combined with a booming demand as China rebuilt its swine herd.
• NFDM/SMP exports (+16%, +111,773 MT) surged to Southeast Asia with regional buyers ensuring they had adequate supplies on hand, EU intervention SMP worked through in 2019, and U.S. product was competitively priced.
• The cushion cheese exports (-0%, -341 MT) built up in the early part of the year, mainly to East Asia, from product sold before the record high prices of the summer and autumn was sufficient to ensure exports remained roughly equal to the year prior.

But let’s move beyond the topline summary and dig into the December data and what it means for 2021:

NFDM/SMP exports hit logistics hurdles in December

The 15% decline in U.S. NFDM/SMP exports in December (vs. the previous year) is a curious development given market dynamics—one we believe is due in large part to ongoing U.S. port issues.

Here’s the reasoning: U.S. suppliers have enjoyed a price advantage over major competitors in the EU and New Zealand since mid-2020—an advantage that has helped drive U.S. sales. Market indications—SMP prices rising for the past couple months despite readily available supply—suggests global demand remains strong and the price differential should continue to spur U.S. sales. But that’s not what we’ve seen in November or December.

Shipping issues created by the pandemic have been affecting ports for nearly a year. Those issues intensified at the end of 2020, with heightened port congestion and equipment shortages and moves by ocean carriers to ship empty containers back to Asia at the expense of outbound U.S agricultural products, including dairy.

For calendar year 2020, U.S. NFDM/SMP exports to Southeast Asia, China and Japan grew 44%, 194% and 68%, respectively, compared to 2019. In December, however, U.S. exports to Southeast Asia (Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam) fell 19%, with sales down in five of the six markets. Exports to China fell 16%; shipments to Japan dropped 84%.

On the flipside, in December, U.S. NFDM/SMP sales to Mexico increased 4% (compared to the previous year), with product trucked smoothly over the border.

The facts suggest that the problems at U.S. West Coast ports are taking a toll on U.S. milk powder exports and that could continue into 2021.

Rebound in Mexican cheese demand? Not yet

Cheese exports to Mexico continued to see a drop off in December volumes compared to 2019 with a reduction of roughly 20% (-1,858 MT) by volume, which follows declines in October and November. Despite this, overall exports to Mexico in 2020 were largely in line with 2019 with overall volume slightly down 3% (2,749 MT).

In global terms, US cheese exports to the world in December were down just 1% (260 MT) thanks to growth to Japan (+956 MT), Canada (+934 MT) and Korea (+578 MT), leaving total 2020 cheese exports flat compared to 2019. Notably, this was achieved during a year with unprecedented price volatility.

U.S. cheese price volatility and wavering Mexican demand continued to be the main culprits for lackluster cheese exports to Mexico. A recent survey of Mexican consumers by McKinsey in November showed that one out of three have reduced household spending due to COVID-19.

Reduced demand is a continuing theme and remains a concern as we move into 2021. With regard to cheese price, even with the most recent food box announcement, we are seeing more stable prices which will likely continue into 2021, absent any further drastic government intervention. On a transportation note, obstacles in logistics remain, with heavy port delays as well as increasing trucking costs; however, the inability to acquire containers may lead to an increased push of product to Mexico via trucks. Overall, as we move into 2021, the main factor to watch for U.S. cheese exports will be Mexican demand.

That’s a wrap for 2020 – Where do we go from here?

Should we expect U.S. dairy exports to set another record in 2021?

Well, it’s certainly not guaranteed as exports in 2021 will face substantial headwinds. The continued logistics challenges, not just in the U.S. but worldwide, have persisted into the new year. Shipping headaches may slow exports, particularly to East Asia, through the first quarter at least. Additionally, some data comparison will be less favorable than it was in 2020. Most noticeably, U.S. whey exports to China in 2021 will no longer be compared to a period where U.S. dairy dealt with retaliatory tariffs and African Swine Fever. Finally, 2020 was an exceptionally strong year in terms of U.S. market share in Southeast Asia, so some mean reversion should not surprise observers. That is still to say nothing about the COVID-19 pandemic and its demand implications.

Still, we have plenty of reasons for optimism. First, U.S. milk production continues to gain steam with growing cow numbers. That new milk will need to find a home, and the export market is the obvious choice given that global demand appears robust with the strong results at recent Global Dairy Trade (GDT) auctions. The alleviation of shipping problems will result in delayed shipments being moved quickly, causing a short-term surge in exports. Additionally, for new business, the U.S. remains price competitive in all the major export products, and even in products it does not usually export, like butter and AMF. Further expanding the U.S. portfolio into milkfat-heavy products beyond cheese remains an untapped opportunity for export growth. Finally, exports to Mexico should stabilize if not improve when compared to 2020 data.

Regardless of whether exports set a record again in 2021, the long-term trajectory for U.S. dairy exports remains distinctly positive with growing demand around the world for dairy products, particularly of U.S. origin.

Source: USDEC

The recent below-zero temperatures in Texas and a blast of late-winter snowstorms aren’t the only signals that climate conversations are destined to become more prominent in agriculture. The Biden Administration is showing its desire to participate actively in global decision-making, rejoining the Paris Climate Accord and making climate an early focus of executive orders. Congress is expected to tackle climate-change legislation this session. And newly confirmed Agriculture Secretary Tom Vilsack has pledged to make climate change – and climate-friendly incentives for farmers – central to his agenda in his leadership return at USDA.

And that’s just in the United States. Globally, climate concerns and food-production discussions are merging, with sustainability increasingly moving from buzzword to marketplace demand, to potentially a requirement to participate in the global food system.

The United Nations is convening a Food Systems Summit in September in which agriculture and sustainability will be the central discussion, and we are working shoulder-to-shoulder with our colleagues at Dairy Management, Inc. and the U.S. Dairy Export Council to make sure U.S. dairy’s leadership is recognized and to partner with other organizations in underscoring the nutritional value of our products as well as the sustainability advances already achieved. But the UN conversation could easily turn negative for dairy, given the role that anti-animal agriculture voices are playing in driving it.

Real movement domestically – and real threats globally – make it imperative that dairy be active as important choices are made. Fortunately, the dairy community, through the hard work of farmers and support for their efforts throughout the entire supply chain, has a proactive, positive story to tell. The Summit offers an opportunity we must seize to tell our story, which is essential in this new era.

We in dairy know just how effective we are in sustainably managing our operations. The U.S. dairy industry is responsible for less than two percent of the nation’s greenhouse gas emissions. Much of that is methane, a relatively short-lived gas that has an impact many scientists say is likely overstated. Meanwhile, according to the Food and Agriculture Organization of the United Nations, North American dairy – which is dominated by U.S. production – is the only dairy region in the world where absolute emissions decreased from 2005 to 2015, by a total of 5 percent. That occurred even as milk production increased over that same period.

Dairy is already part of agriculture’s climate solution, but U.S. dairy is going even further. Our Net Zero Initiative will make domestic dairy production carbon-neutral by 2050 and is accompanied by quantifiable, verifiable goals that will guide the industry to that destination.

We are also playing a leading role in seeking the public-policy solutions and incentives necessary to make plans reality. Last week we announced our membership in the Food and Agriculture Climate Alliance, a coalition of organizations across food, agriculture and the environment that collectively seek voluntary, incentives-based and market- and science-driven approaches to tackle climate policy and build resilient rural communities. Through leading by example in agriculture and building consensus among its constituents, U.S. dairy farmers can meet ambitious goals that will improve our prosperity as well as the planet’s health, with benefits for all.

But before we paint an outlook that’s too rosy, an important note: For all our leadership within the U.S., numerous vocal advocates in the world are in a different place.

While we seek solutions, others, many of whom have an interest in agriculture but live outside it, are calling for certain farmers not to be part of a “solution.” Instead, such farmers would be swept up (and perhaps swept aside) by “revolution,” one they envision would create a sector with less (if any) livestock, fewer farm inputs, and a bias against technological innovation. As U.S. dairy relies more on global markets, and as global actions on climate-change increasingly affect how the U.S. does business, these realities become ever-more-important to address.

As always, the solution is to never shrink from the challenge. The common goal of improving the planet requires neither surrendering to a misguided agenda nor ignoring the problem. Again: We all know what a positive story dairy can tell and the sizable sustainability investments that the U.S. dairy sector in particular is making. Tangible progress on emissions. Innovative practices that can be widely adopted in all regions, on farms of all sizes, with proper incentives. Ambitious goals backed by data. The reality is the world would be better off if the rest of the global dairy industry became as efficient – in milk production and resource use – as U.S. dairy. But much of the global audience, through misunderstanding or simple self-interest, is skeptical of this message.

This is our task in advocacy. As we’ve seen in recent years, in our response to the coronavirus crisis and to our own economic challenges, we can get things done when we’re united and clear in what we set out to achieve. Dairy can and will be – and in fact, always has been – a positive contributor to sustainability solutions. Our products nourish people around the world, and we care for its resources well. Tumultuous weather will always be with us – but with growing shifts in climate, those challenges are becoming more calamitous. We are rising to the challenge as well, as a domestic and global solution and as an informed voice in all debates. We look forward to the opportunity.

Source: NMPF

The long-term trajectory for U.S. dairy exports remains distinctly positive with growing demand around the world for dairy products, particularly of U.S. origin, despite pandemic-induced uncertainty to persist into 2021. 

In spite of the pandemic, in spite of shipping issues, and in spite of historic price volatility in the cheese market, U.S. dairy exports in 2020 achieved:

• A record in milk solids equivalent (MSE) volume of 2.1 million metric tons (MT);
• The highest year of value since 2014 ($6.6 billion); and
• The highest percent of U.S. milk production exported since the Next 5 Percent plan began (16.0%).

More information, data and charts on specific products and markets can be found here.

Despite a 1.1% decline in export MSE volume in the month of December, U.S. dairy capped off a strong 2020 for exports. As we have outlined over the past several months, there have been crucial reasons for strong growth in 2020:

• Whey exports (+24%, +107,013 MT) benefitted immensely from China’s market reopening following the Phase I agreement and exemption for permeate combined with a booming demand as China rebuilt its swine herd.
• NFDM/SMP exports (+16%, +111,773 MT) surged to Southeast Asia with regional buyers ensuring they had adequate supplies on hand, EU intervention SMP worked through in 2019, and U.S. product was competitively priced.
• The cushion cheese exports (-0%, -341 MT) built up in the early part of the year, mainly to East Asia, from product sold before the record high prices of the summer and autumn was sufficient to ensure exports remained roughly equal to the year prior.

But let’s move beyond the topline summary and dig into the December data and what it means for 2021:

NFDM/SMP exports hit logistics hurdles in December

The 15% decline in U.S. NFDM/SMP exports in December (vs. the previous year) is a curious development given market dynamics—one we believe is due in large part to ongoing U.S. port issues.

Here’s the reasoning: U.S. suppliers have enjoyed a price advantage over major competitors in the EU and New Zealand since mid-2020—an advantage that has helped drive U.S. sales. Market indications—SMP prices rising for the past couple months despite readily available supply—suggests global demand remains strong and the price differential should continue to spur U.S. sales. But that’s not what we’ve seen in November or December.

Shipping issues created by the pandemic have been affecting ports for nearly a year. Those issues intensified at the end of 2020, with heightened port congestion and equipment shortages and moves by ocean carriers to ship empty containers back to Asia at the expense of outbound U.S agricultural products, including dairy.

For calendar year 2020, U.S. NFDM/SMP exports to Southeast Asia, China and Japan grew 44%, 194% and 68%, respectively, compared to 2019. In December, however, U.S. exports to Southeast Asia (Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam) fell 19%, with sales down in five of the six markets. Exports to China fell 16%; shipments to Japan dropped 84%.

On the flipside, in December, U.S. NFDM/SMP sales to Mexico increased 4% (compared to the previous year), with product trucked smoothly over the border.

The facts suggest that the problems at U.S. West Coast ports are taking a toll on U.S. milk powder exports and that could continue into 2021.

Rebound in Mexican cheese demand? Not yet

Cheese exports to Mexico continued to see a drop off in December volumes compared to 2019 with a reduction of roughly 20% (-1,858 MT) by volume, which follows declines in October and November. Despite this, overall exports to Mexico in 2020 were largely in line with 2019 with overall volume slightly down 3% (2,749 MT).

In global terms, US cheese exports to the world in December were down just 1% (260 MT) thanks to growth to Japan (+956 MT), Canada (+934 MT) and Korea (+578 MT), leaving total 2020 cheese exports flat compared to 2019. Notably, this was achieved during a year with unprecedented price volatility.

U.S. cheese price volatility and wavering Mexican demand continued to be the main culprits for lackluster cheese exports to Mexico. A recent survey of Mexican consumers by McKinsey in November showed that one out of three have reduced household spending due to COVID-19.

Reduced demand is a continuing theme and remains a concern as we move into 2021. With regard to cheese price, even with the most recent food box announcement, we are seeing more stable prices which will likely continue into 2021, absent any further drastic government intervention. On a transportation note, obstacles in logistics remain, with heavy port delays as well as increasing trucking costs; however, the inability to acquire containers may lead to an increased push of product to Mexico via trucks. Overall, as we move into 2021, the main factor to watch for U.S. cheese exports will be Mexican demand.

That’s a wrap for 2020 – Where do we go from here?

Should we expect U.S. dairy exports to set another record in 2021?

Well, it’s certainly not guaranteed as exports in 2021 will face substantial headwinds. The continued logistics challenges, not just in the U.S. but worldwide, have persisted into the new year. Shipping headaches may slow exports, particularly to East Asia, through the first quarter at least. Additionally, some data comparison will be less favorable than it was in 2020. Most noticeably, U.S. whey exports to China in 2021 will no longer be compared to a period where U.S. dairy dealt with retaliatory tariffs and African Swine Fever. Finally, 2020 was an exceptionally strong year in terms of U.S. market share in Southeast Asia, so some mean reversion should not surprise observers. That is still to say nothing about the COVID-19 pandemic and its demand implications.

Still, we have plenty of reasons for optimism. First, U.S. milk production continues to gain steam with growing cow numbers. That new milk will need to find a home, and the export market is the obvious choice given that global demand appears robust with the strong results at recent Global Dairy Trade (GDT) auctions. The alleviation of shipping problems will result in delayed shipments being moved quickly, causing a short-term surge in exports. Additionally, for new business, the U.S. remains price competitive in all the major export products, and even in products it does not usually export, like butter and AMF. Further expanding the U.S. portfolio into milkfat-heavy products beyond cheese remains an untapped opportunity for export growth. Finally, exports to Mexico should stabilize if not improve when compared to 2020 data.

Regardless of whether exports set a record again in 2021, the long-term trajectory for U.S. dairy exports remains distinctly positive with growing demand around the world for dairy products, particularly of U.S. origin.

Source: USDEC

How many votes could represent the majority of America’s dairy farmers in a hearing concerning federal dairy regulations? The correct answer is 10. How can that be, you ask?

South Dakota dairy producers have undergone a rapid expansion over the past few years to meet the milk needs of the state’s growing cheesemaking industry, bringing a burst of economic prosperity to farm families and farming communities throughout the eastern half of the state.

Milk production in South Dakota rose by 12% from December 2019 to December 2020, and farmers added about 14,000 new dairy cows during that one-year period, according to the USDA National Agricultural Statistic Service. The recent jump in dairy cows and milk production continues a trend of expansion that has evolved over the past decade.

The dairy industry expansion has come in response to South Dakota’s emergence as a major player in the burgeoning American cheesemaking industry, which has seen new plants come online and major expansions of existing plants in the state. 

Industry experts say the increase in milking cows has come from expansion of longstanding dairies, the launch of milking operations at existing farms that have diversified, and also from the relocation of dairy operations to South Dakota from states such as California.

South Dakota officials have sought for years to strengthen the state’s presence in the American dairy industry, and those efforts have dovetailed with the recent expansion of milk-processing capacity at cheese plants and a welcoming regulatory environment to spur the ongoing rise in milk cows in the state.

“We’ve got a tremendous amount of interest in dairy in South Dakota right now and we’re growing to meet the need,” said Marv Post, a Volga dairy operator who is chairman of the South Dakota Dairy Producers Association.

Marv Post

Post said recent expansions have occurred throughout East River South Dakota, including at farms near Bryant, north of DeSmet and in Lake and Brookings counties.

The overall economic impact of the dairy industry in South Dakota is difficult to pinpoint, but it remains a relatively small portion of the state’s overall $32.5 billion annual agricultural industry.

An analysis by a professor at South Dakota State University using 2012 data pegged the direct revenue generation of the state dairy industry at $427 million a year, with about 2,000 full-time jobs, and estimated the total direct and indirect economic impact at about $650 million a year. Most dairy operators employ a mix of local residents and immigrant workers on visas.

That report put the value of each dairy cow in the state at about $7,100 a year, though other reports have estimated the overall economic impact of each dairy cow in South Dakota as high as $26,000 a year. The industry has grown by nearly a third since the SDSU figures were released.

Even as the number of dairy cows continues to rise in the state, the number of dairy farms is on a steady decline. As in other agricultural industries, dairy farmers are increasingly using genetics, data monitoring, technology and robotics to boost the production of each individual animal while implementing an economies-of-scale approach to the size of their farms, raising the efficiency and profitability of their operations.

In 2013, South Dakota had 272 milking operations with about 92,000 cows, compared with 171 farms with 127,000 cows in 2020, representing a 37% reduction in farms and a 38% increase in number of animals. The amount of milk produced rose from 2.0 billion pounds in 2013 to 3.1 billion in 2020, a jump of 55% during that eight-year period.

The amount of milk produced by each dairy cow in the U.S. has risen by 11% over the past decade to almost 24,000 pounds per year, an increase attributed to improvements in breeding, milking technology and animal treatment.

Three major cheese producers in eastern South Dakota have created much of the capacity for the expansion of the dairy industry. The launch of Bel Brands in Brookings in 2014 and major expansions completed in 2019 at the Agropur cheese plant in Lake Norden and at the Valley Queen Cheese plant in Milbank created the need for roughly 115,000 more milking cows to meet the expanded production-capacity needs.

Some farms have sought new or expanded state waste-control permits that allow them to house and milk more animals. The KC Dairies farm operated by Edward Kavanaugh in Elkton, for example, has a concentrated animal-feeding operation expansion permit pending with the state to raise the farm’s animal limit to a maximum of 2,250 milking cows and 800 head of dairy calves.

The dairy industry supported a bill this legislative session to double the time period for renewal of concentrated animal-feeding permits from five to 10 years; the bill passed and was signed into law in February.

The dairy industry’s efficient response to the expansion of cheesemaking operations is close to fully satisfying the current milk-processing capacity at the state’s largest cheese plants. But the ability of dairy operators to provide increasing levels of milk presents even greater opportunities for future expansion or diversification of cheese plants that are seeing no slowdown in the demand for cheese and other dairy products among consumers in America and in other countries around the world.

“The milk growth has certainly got our attention, and I can tell you that we’re not done growing yet,” said Doug Wilke, CEO of Valley Queen Cheese.

Demand for cheese driving dairy growth

Even though consumer consumption of liquid milk has been on a steady decline in the U.S., falling by 28% from 2000 to 2019, America’s appetite for dairy products overall has been on a rapid rise and reached record levels in 2019, according to data from the USDA Economic Research Service.

Per-capita consumption of all dairy products in the U.S. rose by 16% over the past 30 years, from about 560 pounds per year in 1989 to about 650 pounds per year in 2019, according to the USDA. In the past decade alone, per-capita consumption of butter is up 24%, yogurt consumption has risen by 7% and, most important to South Dakota and its cheesemaking industry, per-capita cheese consumption in the U.S. has risen by 19% in the past 10 years.

South Dakota has worked on several fronts to strengthen its dairy industry, which peaked at about 250,000 dairy cows on thousands of mostly small farms in the 1960s, but fell to only about 80,000 cows on a few hundred farms two decades later. The industry began a steady rebound in the early 2000s.

State governors, agricultural commissioners and economic development officials have worked with strong support from educators at SDSU to lure new dairies and producers of dairy products to the state and also to train future farmers to run them.

The recent expansion has been boosted significantly by expansion of milk-processing capacity by several cheesemaking plants in the eastern part of the state.

A big boost to the South Dakota cheesemaking industry came in 2014 when Bel Brands opened its $140 million, 170,000-square-foot plant in Brookings that can produce 22 million pounds of Mini Babybel cheese rounds each year. The plant requires milk from about 15,000 cows.

The need for milk rose again when two existing cheese plants underwent significant expansions. 

Valley Queen spent about $52 million to expand its capacity by about 25% in 2019, and Agropur underwent a $252 million expansion that nearly tripled its capacity.

The South Dakota Dairy Drive has been part of the industry stimulation effort and has seized on opportunities to  draw the interest of farmers to speed growth of existing dairies or lure new producers to the state.

The program has provided opportunities for South Dakota milk producers to attend events such as the World Dairy Expo and World Ag Expo and participate in regional educational forums sponsored by the American Dairy Association. Visits to South Dakota were also arranged for farmers considering relocation to the state.

Dairy farmer Rodney Elliott of Lake Norden said such state programs gave him information about the South Dakota dairy industry and local opportunities for development when he was considering a move from Northern Ireland to the United States. Elliott said he went on a state-sponsored trip to South Dakota in 2004 and moved here to buy land and farm in 2006.

Elliott said the state did not give him financial incentives to relocate to South Dakota, but did offer information and technical assistance.

Since then, Elliott has continued to expand his operation, called Drumgoon Dairy, growing from 1,400 milking cows initially to about 6,000 now. His farm produces about 360,000 pounds of milk each day. 

Elliott underwent a significant expansion recently, including the addition of robotic milking machines, to produce more milk to accommodate the increases in capacity at both Agropur and Valley Queen.

Elliott said he sees greater opportunities for growth in the South Dakota dairy industry in the future.

“It’s a young, vibrant dairy industry that is populated by good, passionate people,” he said. “We look at the dairy industry and we can see a bright future here because many of the dairies are new and using the latest technology and very efficient and built for where we live.”

Tom Peterson, executive director of the South Dakota Dairy Producers Association, said his group has helped several farmers start new or dairies move their operations to South Dakota, including from California, now the nation’s leading state in milk production.

“We’ve had several that have relocated from that California market, which has been prevalent of late,” Peterson said. “We’ve had a lot of growth as far as new dairies but many of our existing farmers are adding on, too.”

Peterson said farmers who relocated to South Dakota from other states were reluctant to be interviewed because they did not want to discuss their relocation efforts so soon. 

The recent growth in the South Dakota dairy industry has also been spurred in part by streamlining of permitting processes for farms and what is seen as a friendly regulatory environment for agricultural operations, Peterson said. Furthermore, the state’s strong row-cropping industry provides a ready source of feed for milking cows, he added.

“In South Dakota, we have had a good balance of milk-processor expansion and farmers coming in for a lot of reasons, for regulatory climate and also a close proximity to feed inputs such as soybean meal or corn silage,” Peterson said. “A lot of those things they need for animal care are close by in adjacent farms, so it’s been kind of a win-win all the way around.”

When any agricultural industry or operation expands, the agricultural industry and businesses that support it all benefit in some way, from farmers who grow corn and soybeans as feed for cows to implement-sales centers to trucking companies.

But beyond the direct impact on farmers and the agricultural industry, Peterson said growth in the dairy industry has a wider tangential boost for communities across the state.

“That money rolls around in communities; it helps local restaurants on Main Street, it helps strengthen schools that would be seeing decreasing populations,” Peterson said. “It’s just a big overall community benefit.”

Cheesemaker sees opportunity ahead

Valley Queen Cheese in Milbank has significantly ramped up production and its need for milk over the past few years.

The cheesemaker completed the $52 million expansion in 2019 that increased milk-processing capacity by about 25%, or roughly by 1 million pounds per day, said Wilke, the CEO. The plant now produces about 200 million pounds of cheese each year.

The plant added about 40 jobs during the expansion and now employs about 315 people with an annual payroll of about $20 million, Wilke said.

The expansion created a significant need for more milk, and the dairy industry in South Dakota has responded by rapidly increasing production, Wilke said. Most of the increased milk production by producers who serve Valley Queen took place through expansion of existing dairies, Wilke said, though the plant has also had inquiries from farmers outside South Dakota who are considering relocation.

Valley Queen has been in operation for more than 90 years, and for much of the 2000s, the company saw steady production with little significant growth, Wilke said. Demand for cheese was strong and rising, but production growth was held back by limited local supplies of milk.

Valley Queen began its expansion at roughly the same time as the Argopur cheese plant in Lake Norden embarked on a major expansion that tripled the milk-processing capacity at its plant from 3.3 million to 9.3 million pounds per day.

The Agropur expansion was estimated to require milk from about 85,000 more cows within its service area; Valley Queen added capacity for about 15,000 more area cows during its expansion, raising the total need to about 90,000 cows, according to the companies. Valley Queen now processes about 1.8 billion pounds of milk each year from dairy farmers in South Dakota and Minnesota.

Wilke said he was curious and a bit concerned to see if the dairy industry in South Dakota could respond adequately for the increased need for milk for the three large plants and other smaller producers, such as Dimock Dairy.

In the three years since, he said he has been pleasantly surprised by the rate of expansion of dairies and the increase in the number of milking cows in the state.

“Valley Queen historically has had limited growth as a result of the milk supply being limited in South Dakota, but now we’ve got an abundant supply of milk and it is growing in our region,” he said.

The company thought it would take South Dakota dairies until 2023 to ramp up production to meet the full need for milk at Valley Queen, but now the capacity requirement appears likely to be reached in 2022, Wilke said.

“Milk production is running ahead of our forecast,” he said.

Doug Wilke

“Milk production is running ahead of our forecast … the milk growth has certainly got our attention, and I can tell you that we’re not done growing yet.” — Doug Wilke, CEO of Valley Queen Cheese in Milbank

With a consistent, strong supply of milk, and growing consumer demand for cheese and cheese byproducts such as whey and lactose, Valley Queen may soon see options for future expansion, Wilke said. Whey is used in protein bars and drinks, and lactose is an ingredient in candies and infant formulas, he said.

“What that next growth cycle looks like depends on how milk production continues to grow in the region and what our customers desire in terms of products,” he said.

South Dakota dairy farmers are taking steps to support their industry in the long run, said Post, the Volga dairy farmer who recently accepted a leadership position in the national dairy industry.

Post said many dairy producers in South Dakota participate in the American Dairy Association checkoff program in which farmers donate 10 cents for every 100 pounds of milk produced to be set aside and used for marketing and promotion. That program has generated about $3.2 million in marketing funds in the past year that can be used to promote dairy operations and products to consumers and potential entrants into the market, Post said. 

Post said he was unable to provide details but said another expansion of milk-processing capacity is likely to occur soon in South Dakota that will require milk from another 30,000 to 40,000 cows.

Post said he expects South Dakota milk producers will be able to fill that need for more milk if it arises.

“We’ve proven that every time there’s been an expansion in processing, that we will produce the milk to fill that need,” he said.

Source: keloland.com

South Dakota dairy producers have undergone a rapid expansion over the past few years to meet the milk needs of the state’s growing cheesemaking industry, bringing a burst of economic prosperity to farm families and farming communities throughout the eastern half of the state.

Milk production in South Dakota rose by 12% from December 2019 to December 2020, and farmers added about 14,000 new dairy cows during that one-year period, according to the USDA National Agricultural Statistic Service. The recent jump in dairy cows and milk production continues a trend of expansion that has evolved over the past decade.

The dairy industry expansion has come in response to South Dakota’s emergence as a major player in the burgeoning American cheesemaking industry, which has seen new plants come online and major expansions of existing plants in the state. 

Industry experts say the increase in milking cows has come from expansion of longstanding dairies, the launch of milking operations at existing farms that have diversified, and also from the relocation of dairy operations to South Dakota from states such as California.

South Dakota officials have sought for years to strengthen the state’s presence in the American dairy industry, and those efforts have dovetailed with the recent expansion of milk-processing capacity at cheese plants and a welcoming regulatory environment to spur the ongoing rise in milk cows in the state.

“We’ve got a tremendous amount of interest in dairy in South Dakota right now and we’re growing to meet the need,” said Marv Post, a Volga dairy operator who is chairman of the South Dakota Dairy Producers Association.

Post said recent expansions have occurred throughout East River South Dakota, including at farms near Bryant, north of DeSmet and in Lake and Brookings counties.

More SD NewsWatch:Health concerns rise as dental patients in S.D. put off care during COVID-19 pandemic

The overall economic impact of the dairy industry in South Dakota is difficult to pinpoint, but it remains a relatively small portion of the state’s overall $32.5 billion annual agricultural industry.

An analysis by a professor at South Dakota State University using 2012 data pegged the direct revenue generation of the state dairy industry at $427 million a year, with about 2,000 full-time jobs, and estimated the total direct and indirect economic impact at about $650 million a year. Most dairy operators employ a mix of local residents and immigrant workers on visas.

That report put the value of each dairy cow in the state at about $7,100 a year, though other reports have estimated the overall economic impact of each dairy cow in South Dakota as high as $26,000 a year. The industry has grown by nearly a third since the SDSU figures were released.

Even as the number of dairy cows continues to rise in the state, the number of dairy farms is on a steady decline. As in other agricultural industries, dairy farmers are increasingly using genetics, data monitoring, technology and robotics to boost the production of each individual animal while implementing an economies-of-scale approach to the size of their farms, raising the efficiency and profitability of their operations.

In 2013, South Dakota had 272 milking operations with about 92,000 cows, compared with 171 farms with 127,000 cows in 2020, representing a 37% reduction in farms and a 38% increase in number of animals. The amount of milk produced rose from 2.0 billion pounds in 2013 to 3.1 billion in 2020, a jump of 55% during that eight-year period.

The amount of milk produced by each dairy cow in the U.S. has risen by 11% over the past decade to almost 24,000 pounds per year, an increase attributed to improvements in breeding, milking technology and animal treatment.

Three major cheese producers in eastern South Dakota have created much of the capacity for the expansion of the dairy industry. The launch of Bel Brands in Brookings in 2014 and major expansions completed in 2019 at the Agropur cheese plant in Lake Norden and at the Valley Queen Cheese plant in Milbank created the need for roughly 115,000 more milking cows to meet the expanded production-capacity needs.

Some farms have sought new or expanded state waste-control permits that allow them to house and milk more animals. The KC Dairies farm operated by Edward Kavanaugh in Elkton, for example, has a concentrated animal-feeding operation expansion permit pending with the state to raise the farm’s animal limit to a maximum of 2,250 milking cows and 800 head of dairy calves.

The dairy industry supported a bill this legislative session to double the time period for renewal of concentrated animal-feeding permits from five to 10 years; the bill passed and was signed into law in February.

The dairy industry’s efficient response to the expansion of cheesemaking operations is close to fully satisfying the current milk-processing capacity at the state’s largest cheese plants. But the ability of dairy operators to provide increasing levels of milk presents even greater opportunities for future expansion or diversification of cheese plants that are seeing no slowdown in the demand for cheese and other dairy products among consumers in America and in other countries around the world.

“The milk growth has certainly got our attention, and I can tell you that we’re not done growing yet,” said Doug Wilke, CEO of Valley Queen Cheese.

Demand for cheese driving dairy growth

Even though consumer consumption of liquid milk has been on a steady decline in the U.S., falling by 28% from 2000 to 2019, America’s appetite for dairy products overall has been on a rapid rise and reached record levels in 2019, according to data from the USDA Economic Research Service.

Per-capita consumption of all dairy products in the U.S. rose by 16% over the past 30 years, from about 560 pounds per year in 1989 to about 650 pounds per year in 2019, according to the USDA. In the past decade alone, per-capita consumption of butter is up 24%, yogurt consumption has risen by 7% and, most important to South Dakota and its cheesemaking industry, per-capita cheese consumption in the U.S. has risen by 19% in the past 10 years.

South Dakota has worked on several fronts to strengthen its dairy industry, which peaked at about 250,000 dairy cows on thousands of mostly small farms in the 1960s, but fell to only about 80,000 cows on a few hundred farms two decades later. The industry began a steady rebound in the early 2000s.

State governors, agricultural commissioners and economic development officials have worked with strong support from educators at SDSU to lure new dairies and producers of dairy products to the state and also to train future farmers to run them.

The recent expansion has been boosted significantly by expansion of milk-processing capacity by several cheesemaking plants in the eastern part of the state.

A big boost to the South Dakota cheesemaking industry came in 2014 when Bel Brands opened its $140 million, 170,000-square-foot plant in Brookings that can produce 22 million pounds of Mini Babybel cheese rounds each year. The plant requires milk from about 15,000 cows.

The need for milk rose again when two existing cheese plants underwent significant expansions. 

Valley Queen spent about $53 million to expand its capacity by about 25% in 2019, and Agropur underwent a $252 million expansion that nearly tripled its capacity.

The South Dakota Dairy Drive has been part of the industry stimulation effort and has seized on opportunities to draw the interest of farmers to speed growth of existing dairies or lure new producers to the state.

The program has provided opportunities for South Dakota milk producers to attend events such as the World Dairy Expo and World Ag Expo and participate in regional educational forums sponsored by the American Dairy Association. Visits to South Dakota were also arranged for farmers considering relocation to the state.

Dairy farmer Rodney Elliott of Lake Norden said such state programs gave him information about the South Dakota dairy industry and local opportunities for development when he was considering a move from Northern Ireland to the United States. Elliott said he went on a state-sponsored trip to South Dakota in 2004 and moved here to buy land and farm in 2006.

Elliott said the state did not give him financial incentives to relocate to South Dakota, but did offer information and technical assistance.

Since then, Elliott has continued to expand his operation, called Drumgoon Dairy, growing from 1,400 milking cows initially to about 6,000 now. His farm produces about 360,000 pounds of milk each day. 

Elliott underwent a significant expansion recently, including the addition of robotic milking machines, to produce more milk to accommodate the increases in capacity at both Agropur and Valley Queen.

Elliott said he sees greater opportunities for growth in the South Dakota dairy industry in the future.

“It’s a young, vibrant dairy industry that is populated by good, passionate people,” he said. “We look at the dairy industry and we can see a bright future here because many of the dairies are new and using the latest technology and very efficient and built for where we live.”

Tom Peterson, executive director of the South Dakota Dairy Producers Association, said his group has helped several farmers start new dairies or move their operations to South Dakota, including from California, now the nation’s leading state in milk production.

“We’ve had several that have relocated from that California market, which has been prevalent of late,” Peterson said. “We’ve had a lot of growth as far as new dairies but many of our existing farmers are adding on, too.”

Peterson said farmers who relocated to South Dakota from other states were reluctant to be interviewed because they did not want to discuss their relocation efforts so soon. 

The recent growth in the South Dakota dairy industry has also been spurred in part by streamlining of permitting processes for farms and what is seen as a friendly regulatory environment for agricultural operations, Peterson said. Furthermore, the state’s strong row-cropping industry provides a ready source of feed for milking cows, he added.

“In South Dakota, we have had a good balance of milk-processor expansion and farmers coming in for a lot of reasons, for regulatory climate and also a close proximity to feed inputs such as soybean meal or corn silage,” Peterson said. “A lot of those things they need for animal care are close by in adjacent farms, so it’s been kind of a win-win all the way around.”

When any agricultural industry or operation expands, the agricultural industry and businesses that support it all benefit in some way, from farmers who grow corn and soybeans as feed for cows to implement-sales centers to trucking companies.

But beyond the direct impact on farmers and the agricultural industry, Peterson said growth in the dairy industry has a wider tangential boost for communities across the state.

“That money rolls around in communities; it helps local restaurants on Main Street, it helps strengthen schools that would be seeing decreasing populations,” Peterson said. “It’s just a big overall community benefit.”

Cheesemaker sees opportunity ahead

Valley Queen Cheese in Milbank has significantly ramped up production and its need for milk over the past few years.

The cheesemaker completed the $52 million expansion in 2019 that increased milk-processing capacity by about 25%, or roughly by 1 million pounds per day, said Wilke, the CEO. The plant now produces about 200 million pounds of cheese each year.

The plant added about 40 jobs during the expansion and now employs about 315 people with an annual payroll of about $20 million, Wilke said.

The expansion created a significant need for more milk, and the dairy industry in South Dakota has responded by rapidly increasing production, Wilke said. Most of the increased milk production by producers who serve Valley Queen took place through expansion of existing dairies, Wilke said, though the plant has also had inquiries from farmers outside South Dakota who are considering relocation.

Valley Queen has been in operation for more than 90 years, and for much of the 2000s, the company saw steady production with little significant growth, Wilke said. Demand for cheese was strong and rising, but production growth was held back by limited local supplies of milk.

Valley Queen began its expansion at roughly the same time as the Argopur cheese plant in Lake Norden embarked on a major expansion that tripled the milk-processing capacity at its plant from 3.3 million to 9.3 million pounds per day.

The Agropur expansion was estimated to require milk from about 85,000 more cows within its service area; Valley Queen added capacity for about 15,000 more area cows during its expansion, raising the total need to about 90,000 cows, according to the companies. Valley Queen now processes about 1.8 billion pounds of milk each year from dairy farmers in South Dakota and Minnesota.

Wilke said he was curious and a bit concerned to see if the dairy industry in South Dakota could respond adequately for the increased need for milk for the three large plants and other smaller producers, such as Dimock Dairy.

In the three years since, he said he has been pleasantly surprised by the rate of expansion of dairies and the increase in the number of milking cows in the state.

“Valley Queen historically has had limited growth as a result of the milk supply being limited in South Dakota, but now we’ve got an abundant supply of milk and it is growing in our region,” he said.

The company thought it would take South Dakota dairies until 2023 to ramp up production to meet the full need for milk at Valley Queen, but now the capacity requirement appears likely to be reached in 2022, Wilke said.

“Milk production is running ahead of our forecast,” he said.

With a consistent, strong supply of milk, and growing consumer demand for cheese and cheese byproducts such as whey and lactose, Valley Queen may soon see options for future expansion, Wilke said. Whey is used in protein bars and drinks, and lactose is an ingredient in candies and infant formulas, he said.

“What that next growth cycle looks like depends on how milk production continues to grow in the region and what our customers desire in terms of products,” he said.

South Dakota dairy farmers are taking steps to support their industry in the long run, said Post, the Volga dairy farmer who recently accepted a leadership position in the national dairy industry.

Post said many dairy producers in South Dakota participate in the American Dairy Association checkoff program in which farmers donate 10 cents for every 100 pounds of milk produced to be set aside and used for marketing and promotion. That program has generated about $3.2 million in marketing funds in the past year that can be used to promote dairy operations and products to consumers and potential entrants into the market, Post said. 

Post said he was unable to provide details but said another expansion of milk-processing capacity is likely to occur soon in South Dakota that will require milk from another 30,000 to 40,000 cows.

Post said he expects South Dakota milk producers will be able to fill that need for more milk if it arises.

“We’ve proven that every time there’s been an expansion in processing, that we will produce the milk to fill that need,” he said.

Source: argusleader.com

Cepea, March 2, 2021 – The prices paid to dairy farmers in Brazil decreased in February for the second consecutive month – in the first two months of 2021, quotes decreased by 6.7%. According to Cepea surveys, the price of the milk produced in January and paid to farmers in February dropped by 2.2% on the net “Brazil average”, to 1.9889 BRL per liter. This was the first time in six months that milk prices were lower than 2.00 BRL/liter. Still, quotes are 34.5% higher than that in the same period of 2020, in real terms, a new record for the month of February (considering the inflation, IPCA from Jan/21).

Milk devaluations were linked to the decrease in the demand for dairy products because of the lower purchase power of Brazilian consumers, the end of the emergency aid paid by the federal government, the increase in the number of cases of covid-19 and higher unemployment in the country.

Cepea collaborators reported that, with unstable consumption, dairy plants trying to adjust production and keep inventories controlled, aiming to avoid steeper price drops for both milk and its by-products. However, inventories are growing, and, since December 2020, agents from distributors are trying to pay lower prices for dairy products.

The bad sales performance in January influenced the price paid to dairy farmers for the milk produced in that month. Cepea surveys show that, on the average of January, prices for UHT milk and mozzarella cheese dropped by 6.8% and 8.9%, respectively, in the wholesale market of São Paulo State, while quotes for powdered milk remained stable. In the spot market of Minas Gerais, quotes decreased by 12.3% on the average of January.

In February, prices for dairy products continued to drop, reinforcing the downward trend of prices paid to farmers in March. Up to February 25, quotes for UHT milk had decreased by 5.4%; mozzarella cheese, by 8.1%; and powdered milk, by 7.2% – São Paulo State. In the spot market of MG, the monthly average dropped by 0.7% between January and February.

SUPPLY – Cepea surveys indicate that, in January, milk purchases by dairy plants decreased by. 4.5% compared to that in the previous month, according to the Cepea Index for Milk Production (ICAP-L), due to the 6.5% decrease in the volume purchased from the states in southern Brazil. Agents from the sector expect supply to decrease even more in the coming months, to the beginning of the offseason. Besides, milk production should be affected by the lower quality and volume of silage in early 2021, due to the bad weather conditions in the last quarter of 2020. Moreover, the valuation of grains (major inputs consumed in dairy farming) has been compromising farmers’ profit margins, hampering production.

Cepea surveys show that, in January, Brazilian dairy farmers needed 41.2 liters of milk to purchase a 60-kilo bag of corn, on average, 16.3% more than in December. Thus, it is worth to mention that, although milk prices are currently at high levels for this time of the year, farmers’ profit margins are dropping, discouraging investments in the activity.

Source: cepea.esalq.usp.br

Dairy farmers should reconsider using palm feed supplements for now, says Dairy Farmers of Canada.

Until an investigation of the “hard butter” issue is completed, “DFC is asking dairy farmers to consider alternatives to palm supplements.”

Palm supplements are sometimes added to dairy rations to help boost the amount of palmitic acid in milk fat, which boosts the overall fat yield.

Existing research has not connected the use of palm-based dairy feed to human health concerns.

DFC’s move comes after Quebec processors announced their concerns.

“Les Producteurs de lait au Quebec is asking producers to stop using products containing palm oil or its derivatives in dairy cattle feed,” the organization said in a Feb. 21 statement.

“We are also asking feed manufacturers to adjust their recipes accordingly and feed consultants to support our producers in making the necessary adjustments to their feed.”

The organization wants the same strictures placed on imported dairy products.

Previously, the Dairy Processors Association of Canada had publicly requested an investigation into the situation to determine if there was a problem.

DFC formed a task force, one that will include industry, experts and consumers, but did not initially suggest a voluntary moratorium on palm-based feed ingredients.

The issue of whether butter has recently become hard at room temperature, and if that is connected to palm supplements, was raised by a national food journalist during the winter and highlighted by food industry academic Sylvain Charlebois of Dalhousie University.

Some people, from across the country, have said they are experiencing butter that no longer grows soft at room temperature. Other people, also from across the country, say they have seen no such thing in their kitchens.

The issue has been dragged into the long-standing debate about the supply management system, around which Canada’s dairy industry is structured, even though that system doesn’t necessarily have anything to do with “hard butter,” palm-based feeds or processing issues.

The story caught fire not just nationally, but across the world’s airwaves. It became the top story on BBC World Service and a promoted story by United States National Public Radio.

The DFC study will attempt to unravel the issue. Currently, there is no reliable data on the prevalence of harder-than-expected butter, whether it is connected to feed, if there is a processing connection, whether other dairy industries elsewhere have noticed similar concerns, and how to address concerns that butter is harder and more difficult for some to spread or bake with.

Butter use has spiked during the pandemic, growing 12 percent in 2020, as millions of housebound people re-engaged in home cooking and baking.

That spike has been good for the industry, but placed a lot of pressure on farmers to boost production to satisfy demand.

Source: producer.com

New Zealand milk output will fall by 10% by 2030 as the country’s dairy industry confronts the combined challenge of improving water quality and reducing its carbon footprint to a net zero level.

Glass’s grandparents moved from a farm in Co. Antrim six decades ago to establish their own dairying enterprise on the outskirts of Canterbury on New Zealand’s South Island.

DHL is a dairy farming business comprising 76 farms at four locations on New Zealand’s South Island. The business is majority-owned by Kiwi shareholders with the business model anchored on the principle of producing as much milk from pasture as possible.

“This is our unique selling point,” Glass stressed.

Milk production in New Zealand is not about actual output; it’s all about making profit. And the evidence clearly points to the fact that profit is strongly linked to pasture production.

Milk prices

Glass told the conference that milk prices in New Zealand had risen significantly over recent years.

“Profits have not. This is because our costs of production have also increased. The most obvious example of this is the enhanced concentrate feeding rates seen on the New Zealand dairy farms,” he said.

“So we have got to get back to basics and this means producing more pasture, more efficiently.

On DHL farms, the milk sold by the business is produced, almost exclusively, from pasture. Irrigation is used, when required, to boost grass growth.

Glass also confirmed that reducing compound feed intake rates is the route by which New Zealand’s dairy industry will met its greenhouse gas (GHG) reduction targets.

“Our first objective is to reduce methane output levels by 10% by 2030. And again, this is all about maximising our levels of milk output from pasture.”

Animal health

Turning to animal health matters, Glass confirmed that the New Zealand dairy industry is in the throes of eradicating Mycoplasma bovis from the country.

“We don’t know how we got the problem in the first place, but the ongoing eradication programme is having the desired effect,” he said.

“The eradication of the disease will be a further selling point for New Zealand dairy products in countries around the world.”

Source: agriland.co.uk

The U.S. dairy sector enters 2021 still in flux following the unprecedented disruptions brought about by COVID-19 in 2020. The sector has shown a remarkable ability to pivot in the changed environment of restrictions on the food service, hospitality and educational sectors and despite volatility in product markets, milk-feed price ratios through much of 2020 were favorable for continued expansion of dairy herds. The dairy sector added 97,800 cows between January 1, 2020 and January 1, 2021 with the vast majority of the increase occurring in the second half of the year. Improvements in producer margins and favorable weather also encouraged productivity gains. In 2020, average milk per cow grew about 1.4 percent on a per day basis, the fastest rate of growth since 2016. Coupled with an additional milking day in 2020 due to leap year, total milk production increased 2.1 percent.

The outbreak of COVID-19 and the resulting restrictions placed on the hotel, restaurant, and institutional (HRI) sector as well as global economic uncertainty squeezed demand and led to a buildup of stocks for a number of products as well as a high degree of volatility in product prices. During the year, milk handlers and producers responded to marketing channel bottlenecks by dumping milk (most notably during April) and changing marketing patterns to take advantage of differences in product prices and demand sources. Milk prices in the second quarter declined sharply as the sector began to adjust to supply-demand imbalances. Milk prices recovered during the second half of the year to average $18.32 for the year as retail demand improved and exports of butter and butterfat, skim milk powder/nonfat dry milk (SMP/NDM), and whey products were above 2019. Government purchases to support the Farmers to Families Food Box program provided some support to product prices. However, at the end of the year, stocks of some dairy products were quite large; butter stocks were the highest since 1992, American-type cheese stocks were the highest since 1984, and NDM stocks were highest since 2004.

Outlook for 2021: More Milk, Large Stocks, Uncertain Demand Patterns in the Face of Higher Feed Prices.

Entering 2021, the situation facing the dairy sector is “unsettled” at best. The sector faces uncertainty as to the timing and path of a return to normalcy of demand or what “normal” will even look like. Milk production is forecast at 227.4 billion pounds, 1.9 percent higher than 2020. With larger milk supplies and large stocks of some products overhanging markets, milk prices are expected to come under pressure. Milk producers will be faced with weaker milk prices at the same time feed prices are expected to increase to their highest levels since 2014. This is likely to bring the expansion of the dairy herd to an end and set the stage for cow inventory declines during the year. However, despite lower producer margins, output per cow is expected to increase at a more rapid rate than in recent years; this will also support increases in milk production and components.

On January 1, 2021, the dairy cow herd was 1 percent higher than 2020, but producers were retaining 1 percent fewer heifers for milk cow replacement. The number of heifers per 100 cows is the lowest percentage since 2009. Equally telling, producers indicated intentions to have almost 2 percent fewer heifers calve during 2021. However, dairy cow slaughter in January was near 2020 and is expected to remain below historical levels during the year. Thus, a majority of the decline in cow numbers will likely reflect a slower rate of cow additions rather a significant liquidation of the existing herd. Although the cow numbers are expected to decline before stabilizing in the later part of the year, the dairy herd in 2021 is expected to average 9.435 million head, 0.6 percent above 2020.

Fueled by gains from continuously improving genetics and management, output per cow per day is forecast to increase just under 1.7 percent in 2021, which is the highest rate of growth since 2014. Feed prices are forecast to be higher during 2021 which is expected to slow the rate of increase in output per cow in the second half of the year.

Domestic Demand Uncertainty Abounds in early-2021.

Despite the loss of a large portion of HRI demand during 2020, support from a variety of government programs providing both income support for consumers and dairy product purchases, and stronger retail demand for some products underpinned domestic demand. After declining in the second quarter, fat-basis commercial use was above 2019 in the second half of the year. Skim-solids commercial use, although rebounding after the second quarter, remained slightly below 2019 in the second half. Among the major dairy products, commercial use of American cheese increased in the second half of the year, but other cheese and butter remained below year-earlier levels. On a skim-solids basis, dry skim milk, dry whey and whey protein concentrates, and lactose remained below year-earlier levels in the second half. For the year, domestic commercial use on a fat basis increased just under 1 percent from 2019. On a skimsolids basis, domestic commercial use was just over 1 percent below 2019.

Moving into 2021, the domestic demand situation remains in a state of flux. Restaurant reopenings have occurred in some areas, but restrictions remain in many areas and some loosened restrictions have been subsequently tightened. Although the impacts of COVID-19 on the economy in general and on dairy demand specifically are expected to diminish over the course of the year, the timing of restriction removals and any government programs remain uncertain. Improvements in income and lower unemployment in 2021 are expected to help drive increased use of milk and dairy products, but the moves toward re-opening the food service and hospitality sectors and schools will be important to stimulating demand. With higher stocks overhanging the market and increased supplies of milk moving into products, lower prices will be needed to balance the markets. Domestic commercial use on a fat basis is expected to increase over 2 percent in 2021, but a further increase in fat basis stocks is expected as demand fails to keep pace with supplies. Domestic commercial use on a skim-solids basis is expected to increase by just under 2 percent as firm demand from the export market competes with domestic use and supports prices for whey and NDM. Skim-solids basis ending stocks are expected to decline slightly in 2021.

International Demand to Strengthen

International markets are an important source of demand for U.S. dairy products. In 2019, the United States exported about 4 percent of milk production on a fat basis and about 19 percent on a skim-solids basis. In 2020, exports grew as U.S prices were competitive with other exporters for most major of products. Butter and milkfat exports were almost 6 percent higher with increases to a number of countries. NDM/SMP exports were 16 percent higher, reflecting increased sales to several Asian countries and whey and whey product exports, principally to China, were 25 percent higher. Cheese and lactose exports were factionally lower than 2019.

For 2021, the U.S. is expected to find support from an improving global economy, moderate production growth among competing exporters, and competitive prices for some products vis-à-vis competing exporters. This demand strength is expected to be most apparent in exports of butter, dry whey, and NDM/SMP. China is expected to remain a strong buyer of whey products as it rebuilds its swine herds. For several other exported dairy products, strengthening domestic demand as the year progresses is likely to erode at least some of the underlying price competitiveness of U.S. exports and current logistical constraints create a degree of uncertainty in competitiveness, but in general exports on both fat and skims bases are forecast to be stronger in all quarters. For the year, exports on a fat-basis are expected to reach 10.1 billion pounds; about 8 percent above 2020 and on a skim-solids basis, exports are forecast to be about 48.9 billion pounds, more than 3 percent above 2020.

Large Stocks Have to be Worked Down

With a few exceptions, (notably several categories of whey products) commercial dairy product stocks were higher at the end of 2020. Much of the increase occurred during the second quarter as the sector was unable to pivot as rapidly to COVID-19 related dairy market supply chain disruptions. Although stocks declined as the sector adjusted, by the end of the year stocks had increased again. Fat basis stocks at the end of 2020 were about 15 percent higher at 15.6 billion pounds. This is the highest level since 1992. On a skim-solids basis, stocks were almost 6 percent higher at just over 10.8 billion pounds. This is the highest level since 2017.

Stock levels in 2021 are expected to decline from their mid-year peaks as domestic and export demand improves. However, stocks will likely remain relatively large, especially on a fat basis as stocks of cheese and butter are quite large. Fat basis ending stocks are expected to increase about 2 percent from 2020 as demand for cheese and butter is more than offset by increased production. However, with support from stronger exports of NDM/SMP and whey, on a skim solids basis, ending stocks are expected to be 10.6 billion pounds, 2 percent below year-earlier levels.

Prices to Average Lower in 2021

In the face of disruptions in both production and marketing due to COVID-19, butter, cheese, NDM, and whey prices fluctuated significantly during 2020. In the months following the imposition of stay-at-home orders and marketing bottlenecks, prices declined sharply. Dried whey prices, on the other hand increased. In the third quarter, prices recovered for cheese, butter, and NDM, but declined for whey. In the fourth quarter, cheese and butter prices declined again, likely reflecting increasing stocks, but support from exports helped lift NDM and whey prices. As 2021 begins, cheese and butter prices are under pressure from larger supplies, but NDM and whey prices continue to receive support from the export market. This pattern is expected to continue through the first quarter. Beyond the first quarter, an improving domestic U.S. economy and an expected relaxation of restrictions on the HRI sector should help lift cheese and butter prices. For 2021, cheese prices are forecast to average $1.695 per pound and butter will average $1.455 per pound, both below last year’s averages.

Firm international demand is expected to support U.S. exports of SMP/NDM and whey. With a relatively large share of these products exported, their prices are more closely linked to supply and demand conditions in international markets that products with a more domestic focus. With moderate increases in milk production likely among Oceania exporters, competition in a number of markets is expected to intensify in the later part of the year. This may result in downward pressure on NDM prices. For the year NDM prices are forecast to average $1.125 per pound, 8 cents higher than 2020. Although increased competition is likely to manifest itself in whey markets as well, China’s demand is expected to keep whey prices firm through most of 2021. Whey prices are forecast to average 48 cents per pound for 2021, almost 12 cents above last year.

In the face of large supplies pressuring butter and cheese prices, the 2021 all milk price is forecast to decline to $17.15 per cwt. The Class III price is expected to decline to $16.60 as the weakness in cheese pries more than offsets strong whey prices. Conversely, the Class IV price will increase as stronger NDM prices more than offset a weaker butter price. The Class III price is forecast to average $16.60 per cwt and the Class IV price is expected to average $13.70 per cwt.

Source: USDA

This week, USDA’s National Agricultural Statistics Service released its monthly Milk Production report, showing yet another annual decline in the number of licensed dairy operations in the United States. After many years of depressed prices, some dairy farmers faced an extremely tough year as the industry struggled with a global pandemic, negative Producer Price Differentials and Federal Milk Marketing Order de-pooling while others enjoyed near record milk prices due to volatility in cheese prices (More Negative PPDs and De-Pooling Reignite Federal Milk Marketing Order Debate).  This year-over-year decline in the number of dairy operations continues a long trend of farmers deciding to exit the dairy business. Since 2003, the U.S. has lost more than half of its licensed dairy operations, now just shy of 32,000 dairy operations.

Dairy Herd and Milk Production

U.S. dairy farmers enter 2021 still in a state of flux following the disruptions caused by COVID-19 throughout 2020 and uncertainty on how new food assistance programs may impact milk and dairy commodity prices. USDA’s Milk Production report showed that annual milk production in the United States in 2020 was 223 billion pounds, increasing just over 2% from the 218 billion pounds produced in 2019. In early 2020, the dairy price environment was very favorable, and despite the craziness of the pandemic, milk-feed price ratios throughout much of 2020 were favorable for dairy herd expansion. However, the rising price of corn and soybean meal prices that began in late 2020 are likely to carry through 2021 as higher feed prices, which will be particularly tough for milk producers as milk prices are trending lower. While the total milk cow inventory at the end of 2020 was the highest since 1995, herd expansion is likely to stop this year and the cow inventory could potentially decline. In addition to a higher cow inventory at the end of 2020, the January cattle inventory report showed a decline in heifers being retained for milk cow replacement. The replacement heifer as a percentage total milk cows rate sits at 48.8%, the lowest level since 2009. Dairy cow slaughter numbers did not significantly spike recently, meaning that the likely milk cow inventory decline will be driven by fewer additions through replacement heifers rather than liquidation of the current herd.

One thing to keep in mind when looking at milk production is the ever-increasing productivity of the milking cows. Milk produced per cow in the U.S. averaged 23,777 pounds for 2020, 382 pounds above 2019’s 23,395, marking a strong year-over-year gain. Unlike the fluctuating overall number of cows, milk production per cow has steadily increased approximately 11.5% from 2011. In 2021, USDA predicts that daily output per cow will increase nearly 1.7%, which would be the highest rate of growth since 2014.

California is the largest milk-producing state in the U.S., clocking in at 41.3 billion pounds. The state is followed by Wisconsin, Idaho, New York and Texas, with 30.7 billion, 16.2 billion, 15.3 billion and 14.8 billion pounds, respectively. Growth in production over the past decade has not been evenly distributed. While production has grown in most of the country, since 2010 it has declined in certain regions, such as much of the Southeast. Colorado has experienced the largest growth in percentage terms, growing 83%, albeit from a smaller base production number. Milk production in Texas has increased 68% since 2010, pushing the Lone Star State into its current position as the fifth largest milk-producing state in the country.  

The Decline of Licensed Dairy Herds in the U.S.

This Milk Production report also showed the fourth-largest year-over-year decline in the number of licensed dairy operations in the last 15 years, and the second-largest (right behind 2019) year-over-year percentage decline since 2003, the first year for which the data is available. There were 2,550 fewer licensed dairy operations in 2020 than in 2019, when the number dropped by 3,261. The overall number of licensed operations in the U.S. has marched steadily downward since data collection began, declining by more than 55%, from 70,375 in 2003 to 31,657 in 2020.  The last three years of data show larger year-over-year declines than any other decline in the last 13 years. This recent acceleration of the decline reflects how difficult it is to operate a dairy in a low milk price environment. Since the end of 2014, dairy farmers have struggled with low prices followed by an industry-disrupting pandemic that increased milk price volatility and rendered risk management tools mostly ineffective.

No state registered an increase in licensed dairy operations from 2019 to 2020. In terms of the decrease in the number of licensed operations, Wisconsin led the country with 610 fewer operations in 2019 than a year earlier. Following Wisconsin was Minnesota, Pennsylvania, New York and Ohio, with declines of 380, 300, 240 and 195, respectively. The Upper Midwest and the eastern Corn Belt lost the most licensed dairy farms. The loss of licensed dairy farm operations during 2020 closely aligns with Chapter 12 farm bankruptcies – especially in Wisconsin, Minnesota and in the Northeast (Farm Bankruptcies During 2020).

Summary

U.S. dairy farmers enter this year still in a state of flux following the disruptions caused by COVID-19 throughout 2020. Uncertainty remains as to how future food assistance program will impact milk price volatility in 2021. NASS’ most recent monthly Milk Production report showed yet another decline in the number of licensed dairy operations in the U.S., and one of the largest year-over-year percentage declines registered since 2003, when the data was first collected. After many years of dealing with depressed prices, many dairy farmers faced an extremely tough year as all of agriculture struggled in dealing with a global pandemic.  This year-over-year decline in the number of dairy operations continues a long trend of dairy farmers deciding to sell the cows and close the barn doors.

Source: fb.org

FOREIGN investors looking for good returns on their capital should look closely at the Russian dairy industry as the future holds very strong growth potential there, writes Chris McCullough with live coverage from EuroTier 2021.

That was the overall picture painted by Artem Belov, general director at the Russian National Dairy Producers Union, speaking at the digital EuroTier event.

The union is an overall body for around 2,000 companies including both farmers and processors and has big name members such as Danone and Kaufland who invest in the Russian dairy market.
Recent milk consumption in Russia has been recovering well following a big decline that lasted for many years.

From 2013 to 2018 there was a slide in consumption of dairy products in Russia from 245 million tonnes in 2013 to 229 million tonnes in 2018. Then the market picked up and the total for 2020 is 240 million tonnes.

“The main reasons for the decline in consumption was a drop in disposable income of the population,” said Artem. “The total decline was around 8% to 10% during this period. However, during the last two years, things have changed and we have seen an increase again in dairy produce consumption. I think the main reason for the increase in the last year is down to people self-isolating.

“More people were at home and therefore the consumption of cheese and butter, and a local product called Smetana (sour cream), went up because of an increase in home cooking,” he said.

Looking ahead to the prospects for the Russian dairy industry in 2021, Artem said it will be more difficult as costs have gone up.

“It will be a very tough year as the costs of production of raw milk and in the processing have gone up accordingly,” he said. “The costs of production in our estimations have risen 15% due to the devaluation of the Ruble currency.

“Also the costs of processing have risen by 5% to 7%, so the price of the milk on the shelf has gone up. My expectation for 2021 is not so positive,” he added.

Looking closely at the consumption of dairy products around the world, in the 2017 – 2018 year the top country was Finland with 452 kgs/capita per year. One of the lowest consumers in that same period was Japan with only 59 kgs/capita.

High consumers included Germany at 420 kgs/capita; Austria 398 kgs/capita and the United States at 283 kgs/capita. Russia was at the lower end of the scale with 234 kgs/capita.

“I think there is potential for the dairy consumption in Russia to grow by around 30%,” said Artem. “That would compare with Germany or Finland. Of course consumption depends on the real disposable income of the population, and I think in the future the economy in Russia will also get better. Investors will do well here in the future.”

Looking at imports, the dependence of the Russian domestic market on imports of dairy produce is decreasing.

“During the last seven years the imports of dairy produce to Russia declined about 25% to 30%,” Artem said. “I think this will decline more in the future as well by around 2% to 3% per year.”

Artem also highlighted the growth of domestic milk production contributes to an increase in self-sufficiency in milk and dairy products on the Russian domestic market. Commercial milk production has growth rapidly by 12% over the past three years, he added.

“In Russia we have two figures for milk production,” Artem said. “The first one is total raw milk production and the second is raw milk production for processing. This is because in Russia we have a lot of households with a few cows that produce milk for their own consumption.

“Total raw milk consumption has been quite stable over the last 10 years at around 30 million tonnes of total raw milk per year. If we talk about the total for processing, over the last seven years we have had a growth rate of 3% to 4% increase per year which equates to 800,000 to 900,000 tonnes per year.”

Artem explained these increases were down to farm modernisation, better yields per cows, intensification, better prices and significant state support of low interest rate loans.

Source: thedairysite.com

Chinese consumption of liquid milk rose strongly in 2020 and is expected to continue growing in the coming decade, creating export opportunities for dairy producers in Australia and other key dairy-producing regions, according to Rabobank senior dairy analyst Michael Harvey.

Speaking on a newly-released RaboResearch podcast, Mr Harvey said there had been strong consumer demand for liquid or ‘white’ milk in China during 2020, despite the impact of the COVID-19 pandemic.

This would continue to grow.

“Chinese demand for dairy has plenty of space to grow long term – largely attributable to long-standing key drivers such as low per-capita consumption and strong private and public investment into the sector due to the health benefits of dairy products,” he said.

“And with many of the big dairy companies in China now starting to provide their 2020 full-year results, what’s really interesting is we’re seeing that many are reporting rapid revenue growth for ‘white milk’.

“Companies like Yili and Mengnui, for example, have reported double-digit growth in ultra-high-temperature (UHT) long-life milk sales with the companies putting this down to the health and wellness benefits consumers are seeing.”

Mr Harvey said liquid milk had been a long-standing growth market for a lot of dairy exporters around the world in the past decade, with exporters from Australia, New Zealand and the European Union the major beneficiaries.

“Liquid milk imports into China notched up a couple of major milestones in 2020, with September last year the first time more than 100,000 tonnes of liquid milk have been imported in a calendar month,” he said.

“Last year was also the first time that China has imported more than one million tonnes of liquid milk in a calendar year.

“When you compare this to 2008 – when only 8000 tonnes of liquid milk were imported into China – it does give you an indication of how strong growth has been, with this increase representing a compound annual growth rate (CAGR) over this period of around 50 per cent.”

EU market share growth

Mr Harvey said of the big three key liquid milk exporters into China (New Zealand, the EU and Australia), the EU had recorded the biggest increase in export volumes in 2020, while Australian volumes had remained flat.

“Chinese liquid milk import volumes from the EU-28 rose by 26pc last year and in particular there was really strong growth out of Germany – the largest exporter in the EU bloc – which increased volumes by around 31pc,” he said.

“New Zealand liquid milk volumes into China also grew strongly and were up by 9pc, although Australian volumes were flat.”

Mr Harvey said the Australian volumes were a “reflection of market dynamics, not trade tensions”, with Australian liquid milk exports to China in 2020 impacted by factors including low production and competing export markets.

He said the strong growth in liquid milk exports out the EU was primarily down to changes in local EU market dynamics.

“In the EU, there have been a number of lockdowns and other measures related to the pandemic, which have reduced consumption within the EU bloc,” he said.

“Several of the EU’s major markets in the North Africa region have also had significant COVID-19 issues and these, combined with political and civil disruption in this region, have impacted the flow of exports into these markets.

“And this has resulted in the EU directing an increased volume of liquid milk into China and picking up share in this market.”

Short-term head winds

While China’s demand for liquid milk imports was expected to continue its growth path in the long term, Mr Harvey said, there were some immediate headwinds for Chinese consumption growth.

“Several of the major Chinese dairy brands are talking about margin pressure in 2021, with this coming from two main sources,” he said.

“Firstly, the cost of local milk in China is at near-record levels largely driven by a big lift in the cost of feed for Chinese corporate farms.

“Secondly, the rise in liquid-milk consumption in recent times has partially been at the expense of other higher-margin dairy products, such as drinking yoghurts and flavoured milk.

“To combat the resulting margin squeeze, a number of Chinese dairy brands have increased their retail price for milk and this could have a negative impact on overall liquid milk purchases for some consumers.”

Mr Harvey said regional COVID-19 flare-ups in the country also shaped as a possible threat to liquid milk consumption growth.

Source: farmonline.com.au