Milk tankers.
September 26, 2018

More Milk Requires More Exports

 |  By: Dairy Talk

The United States Department of Agriculture’s August milk production report suggests that even though dairy farmers might not be adding cows, they continue to market more milk.


Once again, milk production climbed 1.4% year-over-year both in the top 23 dairy producing states and in the U.S. overall. That’s despite lower milk prices, softened by the imposition of tariffs on U.S. exports to Mexico and China.


Cow numbers in August were down 4,000 head from a year ago. Month-to-month cow numbers always need to be taken with a bushel of salt because they are based on farmers surveys (not that farmers would lie), and thus are always a little suspect.


Culling numbers tend to be more accurate because they are based on actual data of cows killed through federally-licensed slaughter facilities. In August, farmers culled 40,000 more head than they did in July, 14,000 more cows than they in August 2017, and year-to-date, more than 100,000 head have been slaughtered than in 2017.


And yet, milk production continues to grow. Over the first eight months of this year, milk production has grown an average of 1.2% per month. This is off historical growth rates by almost half, but it still suggests farmers will pump at least two billion pounds more milk into the market than they did last year.


The chart below from the U.S. Dairy Export Council shows the growing gap between U.S. milk production and domestic consumption.



The gap between U.S. milk production and U.S. domestic consumption.


Without growth in exports, were dead in the water. Prospects for progress with Canada and China are iffy, at best. Mexico offers more hope.


“I am more hopeful about tariffs lifting in Mexico than China” says Tom Vilsack, USDEC CEO and president. “If our government ends its steel and aluminum tariffs on Mexico, this may ultimately lead to Mexico's elimination of retaliatory tariffs of our exports. But nothing is certain,” he says.


USDEC forecasts global dairy demand will grow 1.3 million metric tons over the next three to five years. Vilsack believes U.S. suppliers could capture half of that burgeoning demand, increasing U.S. cheese exports by 200,000 tons and U.S. dairy ingredient exports by 450,000 tons.


Given the quagmire of trade negotiations, grabbing a 50% share of growing markets won’t be easy. But USDEC has committed millions more, some of which are coming from your checkoff dollars, to make it happen. Rising oil prices will also help, allowing countries with oil revenue to buy more dairy products.


Still, it will be daunting task. I know it’s trite to say this, but we can only hope USDEC and U.S. exporters are up to it.