7 January 2013

3 minute read

North America

November 2012 23 major dairy states milk production increased 1.1 per cent. Production per cow was up by 19 pounds from one year ago. Milk cow numbers were 3000 less than November 2011 but we added 8000 cows compared to October 2012.

The largest declines in milk production occurred in New Mexico and Texas. Feed costs caused some of the drop in milk there but also heat stress has negatively impacted milk per cow for the current lactation.

Again this month, Colorado had the largest increase in milk production due to more milk cows and more milk per cow. New dairy plants in Colorado are looking for more milk cows also. Iowa added 5000 cows from one year ago and added 25 pounds of milk per cow.

USDA’s “Livestock Slaughter” report said dairy producers sent 269,000 dairy cows to slaughter during November 2012, 16000 less than October 2012 and 12000 more than one year ago. During Jan-Oct period, US dairy producers culled 191000 more dairy cows than one year ago. The pace of dairy cow slaughter has declined from the October report however.

Demand or Disappearance

“So far (January-September) 2012 is off to a better start with total commercial disappearance up 2.1 percent. Total commercial disappearance set all-time monthly records January-March and May-Aug; however, was down in April (-3.3 percent) and September (-2.2 percent).

"The January through September disappearance of individual dairy product categories was: American cheese, +1.9 percent; other cheese, +2.2 percent; nonfat dry milk, +27.7 percent; butter, +3.6 percent and fluid milk, -1.5 percent.” said Craig Thomas, Michigan State University Extension.

Analysis

The Nov 2012 Income Over Feed Cost (IOFC) calculation for milk production is much improved compared to the lows in July and August and is above the 5-year average. The Consumer Confidence Index rose slightly compared to the previous month and is now nearly 74, much higher than the low this summer, just over 61 in August.

On the other hand the Restaurant Industry Index and Expectations Index fell to 99.9. This was up 0.4 per cent from the previous month. When these indices are above 100 restaurant performance and expected conditions is that expansion will occur. Thus it appears restaurants still expect slight contraction.

The June Class III milk price remains in a narrow trading range 25 cents above or below $18.40. Except for a short period in September, this has been the trading range since mid-August. September did give dairy producers an opportunity to lock in Class III prices for june above $19 but that did not last long.

Future milk prices may turn bearish if the milk production growth continues. The reason for milk production growth is not clear, but hot weather this past summer could depress future milk per cow and thus total milk production. What happens often is that reproduction suffers during hot weather and days in milk (DIM) increases.

As DIM increases, cows will produce less milk daily and total milk from a herd declines unless heifers are available to replace those cows. Bob Cropp, suggests that milk prices for the first half of 2013 appears likely to be flat.

TheCattleSite News Desk