Outlook for milk production, cost

NORWOOD YOUNG AMERICA, Minn. — At the Carver County Dairy and Beef Expo Feb. 19, the keynote speaker, Dr. Chris Wolf, addressed the importance of components, how exports affect the U.S. economy and the industry’s prices. 

“We were coming off of pretty high prices in 2022, which was a profitable year in general,” Wolf said, of Cornell University. “However, this is the second year in a row that we really didn’t have any milk production growth collectively in the U.S.”

Milk production has been limited in the U.S. due to the lack of storage and processing space among creameries, Wolf said. 

Wolf said many milk processors would like to run another shift to process milk sooner and create more storage space.

On the farm, producers have added to their paychecks by increasing components.

“Milk production is flat, but butterfat is not,” Wolf said. “2010 is when it took off. We are now averaging 4.5% butterfat.”

Wolf said in the past, people thought consuming animal fat was a negative. However, in recent years, it has been proven otherwise, causing increased demand for butterfat.

“After a long time of being told to not consume animal fat, we are seeing a change,” Wolf said. “Animal fat consumption has gone up, especially in the last 10 years. In response, butterfat prices have gone up.”

Along with this, whole-fat milk is the only form of dairy milk that has experienced increased consumption, Wolf said. Higher demand and increased prices have created the incentive to push for components rather than pounds of milk.

Increasing components is one way farmers can add more to their paychecks without being docked for increased volume or incurring hauling charges. However, maximizing components is not possible worldwide. 

“Canada has a production quota (for butterfat) that they set each year based on what they think the butterfat consumption they need will be,” Wolf said.

Another change in the dairy community has been the decline in the number of dairy cows and an increase in the number of dairy-beef crossbred cattle.

Wolf said in 2016, 23 million units of dairy semen were sold. In 2021, 7 million fewer units of dairy semen were sold. During this time, beef semen went up 6.5 million units.

“The beef crosses are doing better, so this is a place to make some money,” Wolf said.

Another way farmers can look at their profitability is through the demand for dairy foods worldwide through U.S. exports.

Wolf said exports began to climb in 2006.

“Prior to that, we were exporting 4%-5% of U.S. milk production and were importing an equivalent amount of different products,” Wolf said. “We still tend to export bulk commodities like skim milk, some cheese and butter, but we send more powders and proteins.”

The products that the U.S. tends to import are specific cheeses, such as parmesan, or other high-value products. Wolf said the U.S. imports about 3%-4% of the dairy products sold nationwide.

“We are competitive with world prices,” Wolf said. “We are less competitive with butter and cheese price because we don’t ship as much compared to the powder.”

While it can be expected that increased exports would play a major role in the price farmers receive for their milk, a fair amount of the product does not go far.

“43% of U.S. dairy exports go to two places: Mexico and Canada,” Wolf said. “In 2014 and 2022, when China imported a lot from us, we had good milk prices. When China comes in, they move (the whole market).”