July 12, 2019

World Milk Production Tightens

 |  By: Fran Howard

Out of 44 milk-producing countries, only two—Brazil and India—are expected to expand their milk herds this year, according to USDA’s semi-annual report Dairy: World Markets and Trade. With cow numbers expected to remain steady or decline in most of the world’s largest milk-producing countries, gains in per cow output will be critical if world output is to expand. 

“With weather taking a turn for the worse in many dairy-producing countries, world milk supplies are likely to reflect the full impact of a shrinking dairy herd,” says Sarina Sharp, analyst with the Daily Dairy Report. “A temporary—but unusually steep—decline in dairy output is possible if the weather worsens.”

Already, a late-June, record-setting heat wave in Europe has likely affected per cow output. Europe’s top dairy nation, Germany, suffered the hottest June on record as did Poland, ranked fifth on Europe’s dairy ladder. France, the European Union’s second-largest milk producing nation, saw temperatures soar to a record 113.2° F. “Such sweltering temperatures are rare in Europe, and most European dairies have not invested in cooling systems on par with those in the hotter dairy regions of the United States,” Sharp notes. 

Across the Atlantic, milk production in the United States was already below year-earlier levels in May even before heat became a factor. May output in the United States fell 0.4% to just over 19 billion pounds, and cow numbers were nearly 1% below year-earlier levels, according to USDA’s latest Milk Production report.

Turning to India, the country’s much-needed monsoon season has gotten off to a poor start. As of late June, India’s monsoon rains were only 36% of normal, according to India’s Meteorological Department. “Farmers in India have been waiting for rain before starting to sow rice, corn, and soybeans, and crop yields are expected to suffer,” Sharp notes. “Feed costs in India have climbed, raising the cost to produce milk, which could lower milk output in the long run.” 

In Brazil, the situation is better, according to Monica Ganley, analyst with the Daily Dairy Report and principal at Quarterra, a food and agriculture consulting firm based in Buenos Aires. “Milk prices have soared 15.3% since the beginning of the year, and at $17.40/cwt. (USD), Brazilian milk prices are currently the highest in the region and should far exceed the cost of production for most dairy farms,” Ganley says. According to the Brazilian Institute of Geography and Statistics, Brazil’s year-over-year milk production grew 2.2% in both January and February before accelerating to a 4.7% increase in March. “Looking to the second half of this year, more milk will come online, both from normal seasonal fluctuations and motivated farmers looking to capitalize on high margins,” Ganley notes.     

Elsewhere in the Southern Hemisphere, New Zealand milk output in May of 868,000 metric tons, or 1.91 million pounds, fell 0.1% from a year ago on a fluid basis and 1.1% on a milk solids basis. For the season, New Zealand’s milk production has climbed 2.4% from the 2017-18 season on a milk solids basis. Since 2013-14, New Zealand’s season-over-season milk production growth has basically been stagnant, according to Sharp. “Expectations for the upcoming season are similar, with output expected to be flat to slightly higher—a situation that is unlikely to change anytime soon,” she adds.

In nearby Australia, however, the situation is dire. Ongoing drought and lack of feed have forced many dairy producers out of business. According to Dairy Australia, milk output for the last 12 months ending May 2019 plunged 7.7%. Since January, year-over-year milk production has fallen by double digits each month.