The U.S. dairy sector is in decline, with the USDA lowering its forecasts for 2023 milk output and milk cow herd for every month last year. In 2023, the milk-cow herd dropped by about 50,000 head, with a further 23,000 head lost between December and January. This fall correlates with a sharp drop in dairy cow slaughter, with some dairy farmers driven out of business owing to low Class III pricing and substantial discounts on milk earnings.
In January, milk production was 19.1 billion pounds, a 1.1% decrease from the previous year and the largest year-over-year shortfall in two years. In 18 of the 24 major dairy states, production did not reach previous year’s amounts. Milk production in Europe and the United Kingdom declined 0.7% year on year in December, with Poland being the only country among the bloc’s seven main dairy countries to produce more milk in December 2023 than in December 2022. Tractors have stopped traffic in towns throughout Europe as farmers protest the Green Deal’s red tape. Farmers are particularly upset about increasing gasoline prices and competition from imports that are not subject to as stringent rules.
The EU Commission simplified or lowered some of the criteria under the bloc’s Common Agricultural Policy, allowing farmers some leeway from government demands to fallow lands and abandoning a commitment to halve pesticide usage by 2030. European dairy farmers are feeling harassed, as they confront greater expenses and a more stringent regulatory environment than their counterparts across the Atlantic. Growth may continue in locations like Poland, but Europe’s dairy sector is unlikely to attract significant new investment.
Producers in New Zealand are more confident, as expected pay prices rise with the global milk powder price. Kiwi milk output dipped 1.2% below year-ago levels in January, however for the season as a whole, milk output is down 0.6% on a fluid basis, while milk solids production is up 0.8% due to stronger components.
Slower milk supply has helped boost dairy product prices, but further gains would need stronger demand. This week’s Global Dairy Trade auction had mixed results, with anhydrous milkfat performing well, butter prices surging, skim milk powder (SMP) rising, and whole milk powder (WMP) falling 1.8%.
Original Report At: https://www.jacoby.com/market-report/usda-trims-2023-milk-estimates/
