The highly pathogenic avian flu (HPAI) has been confirmed in dairy herds in Michigan, Texas, Kansas, and Idaho, with some presumptive positive test results received from a herd in New Mexico. This has raised concerns for the dairy industry and consumers as pasteurization inactivates the bacteria in the commercial milk supply. HPAI has not had an impact on milk futures or the underlying cash prices, but it has put pressure on Class III milk futures sending nearby months to new contract lows.
The milk production report for February showed a decrease in milk production as anticipated, but the increase in cow numbers from January was a surprise. Cow numbers increased by 8,000 head from January for the top 24 states totaling 8.878 million head, down 61,000 head from February 2023. U.S. Cow numbers totaled 9.330 million head, down 89,000 head from a year ago but up 10,000 head from January. It was anticipated that cow numbers would fall as low milk prices continued. However, USDA revised cow numbers 3,000 head lower in to the top 24 states and 5,000 head lower in the U.S. from what was initially recorded last month.
The continued tightening of replacement heifers will also impact cow numbers and the ability of farms to keep stalls full or expand operations. There seem to be some positive things taking place in the market that may eventually provide support to prices, but it does not seem that prices are ready to move higher. They may not move higher over the next few months unless there is better international and domestic demand or a further tightening of the milk supply. In the near term, prices may remain choppy as buyers of dairy products see no reason to become concerned over supply.
