According to Jennifer Spencer, Ph.D., AgriLife Extension dairy specialist in Stephenville, milk prices remain historically good for producers, and demand for milk and milk products ranging from cheese to ice cream remains strong. However, she claims that higher input costs are reducing profitability.
According to Spencer, Texas continues to perform well and add dairy capacity and cows. Texas surpassed Idaho to take third place in milk production for the first six months of 2022. However, the summer heat reduced output, and Texas finished fourth for the year.
Texas dairies produced 15.1 billion pounds of milk as of December 1, a 6% increase over the same period last year. According to the US Department of Agriculture, Spencer expected the 2022 total to be near 16 billion pounds by the end of the year, up from 15.6 billion pounds in 2021.
Prices remained above $23 per hundredweight in 2022, after fluctuating between $23 and $25 per hundredweight. The price per hundredweight averaged $23.67.
However, dairy producers faced additional challenges this year as higher costs reduced potential profits, according to Spencer.
Feed costs account for roughly 60% of dairy producers’ expenses on average, she claims. Drought and high fertiliser costs impacted forage yields this year, and prices for grains and supplemental feed like cotton seed rose dramatically.
Fuel costs and labour shortages also hampered dairy operators more than in a typical year, according to Spencer.
“Dairy producers had more opportunity to be profitable in 2021 because they didn’t have to struggle to keep up with rising feed and other costs,” she says. “Despite the good prices, it was a difficult year.”
Texas dairies are continuing to follow industry trends in which dairy size and overall production are increasing while the number of operations is decreasing.
TEXAS DAIRY PRODUCTION IS EXPANDING
Texas’ dairy production could increase significantly in the coming years as processing capacity expands to handle milk. Multiple soft cheese processing facilities, such as cottage cheese, cream cheese, and other spreadable cheeses, are set to expand or open in the next two years to meet rising demand.
The cheese industry was the primary destination for the 226 billion pounds of milk produced in the United States in 2021. 1 pound of cheese requires 10 pounds of milk.
Amarillo’s facility will open later this fall, and Stephenville’s facilities will likely expand. Another facility in Lubbock is set to open in 2024, and a new facility in western Kansas will receive milk from the Texas Panhandle.
Dairies in the Texas Plains produce approximately 80% of Texas milk.
“Texas dairies increased their production capacity by about 25,000 cows this year, and the processing expansion will help producers add to that growth,” she says. “One of the limiting factors impeding production is processing capacity.”
Liquid milk consumption is declining, but dairy products for lactose intolerant consumers are increasing, according to Spencer. Summer ice cream demand typically results in seasonally higher milk prices.
Whey, which is used in products such as muscle recovery powders and baby formula, is a growing part of dairy demand, according to Spencer. It is a byproduct of cheese production that was considered waste until a use for its 99% amino acid protein was discovered.
Spencer claims that consistently expanding dairy options for consumers is driving overall production growth in the United States.
“Texas producers are very progressive, so they are adapting to the challenges in order to maintain production and profitability,” she says. “The demand is there, and I believe there is room for Texas dairy production to expand further.”
