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Archive for decline

U.S. Milk Production Plummets to Historic Lows

Friday, August 23rd, 2024

Find out why U.S. milk production is at historic lows and what you, as a dairy farmer, need to know to get through this crisis. How will this impact your farm’s future?

Summary: U.S. milk production has been declining for 13 straight months, with June and July seeing historic drops of 1.7% and 0.4%, respectively. As the dairy herd shrinks and ages, spot milk prices have soared due to strong demand from bottlers and processors. Global factors, including active Chinese participation in the Global Dairy Trade auctions, have further complicated market dynamics by pushing milk powder prices higher. U.S. cheese inventories are at their lowest since 2020, and overall dairy product prices remain volatile. Dairy farmers face significant pressures but have opportunities to mitigate these challenges through strategic herd management, quality feed, and market awareness.

U.S. milk production has faced a decline for over a year, creating historic drops in mid-2023.
The shrinking and aging dairy herd has resulted in higher spot milk prices.
Strong demand from bottlers and processors is driving up milk prices.
Increased participation from Chinese buyers in Global Dairy Trade auctions has pushed milk powder prices higher.
U.S. cheese inventories are at their lowest levels since 2020, reflecting volatility in dairy product prices.
Dairy farmers can combat these pressures with strategic herd management, quality feed, and staying informed about market trends.

milk output, United States, record reduction, production, decline, USDA, dairy herd, growth, managing herds, cull rates, older cows, milk production, stall, rising demand, valuable commodity, spot milk prices, bottlers, processors, milk powder costs, CME spot nonfat dry milk, whole milk powder, skim milk powder, global demand, Chinese purchasers, Global Dairy Trade auctions, milk powder stocks

Milk output in the United States is on track for a record reduction, with production falling for 13 months—the most extended period in modern history. The USDA reported a 1.7% decline in milk output in June, followed by a 0.4% fall in July. What does this imply for your farm and the future of dairying in America?

Month	2023 Milk Output (million pounds)	2024 Milk Output (million pounds)	Year-over-Year Change (%)
June	18,575	18,260	-1.7%
July	18,430	18,360	-0.4%
August	18,800	18,700 (est.)	-0.5% (est.)

America’s Dairy Slump: Facing the Hard Truths of Historic Milk Production Declines

The present status of U.S. milk production is distinguished by unprecedented decreases, with a 1.7% loss in June and a 0.4% dip in July compared to last year. These numbers highlight the most severe two-year slump in decades. The USDA has updated its projections, indicating a lower dairy herd of 9.325 million cows in July, down 43,000 from July 2023. This diminishing and aged herd cannot support considerable growth despite seasonal mild temperatures.

Feeling the Squeeze: How Declining Milk Production Hits Dairy Farmers Hard

Month	Number of Milking Cows (2024)	Number of Milking Cows (2023)	Year-over-Year Change
January	9,368,000	9,392,000	-24,000
February	9,355,000	9,385,000	-30,000
March	9,325,000	9,371,000	-46,000
April	9,312,000	9,362,000	-50,000
May	9,300,000	9,354,000	-54,000
June	9,290,000	9,338,000	-48,000
July	9,325,000	9,368,000	-43,000
August 1-23	9,332,000	9,376,000	-44,000

So, how does the drop in milk output affect dairy producers where it counts the most? Let’s dig right in.

First and foremost, sustaining herd numbers becomes an uphill task. Dairy producers find it more challenging to manage their herds at ideal size. The USDA reported a 43,000 head reduction in milk cows from July 2023 to July 2024. Maintaining herd numbers has become a difficult challenge. Dairy producers need help managing their herds at appropriate levels. The USDA announced that the number of milk cows had decreased by 43,000. That’s a considerable drop, making it challenging to build up output.

Furthermore, higher cull rates exacerbate the situation. Farmers have little option but to cull their older, less productive cows. But here’s the kicker: the surviving cows aren’t growing any younger. According to the USDA, the dairy herd is aging, and older cows produce less milk. What are the consequences? A less efficient herd is failing to satisfy demand.

The actual data provide a striking picture. For the last 13 months, milk production in the United States has been lower than in the previous year. USDA figures indicated a 1.7% loss in June, which eased somewhat to a 0.4% drop in July. This protracted fall is not a fluke but a pattern with far-reaching consequences (USDA Milk Production Report, 2024).

So, what are farmers to do? Producers are working to fill every stall and reduce cull rates. However, the truth remains: a decreasing, aged herd cannot satisfy rising demand, making milk and other dairy products a valuable and costly commodity.

Have you felt the pinch yet? You are not alone. But knowledge is power, and knowing these obstacles is the first step toward overcoming them.

Spot Milk Prices Soar: Bottlers and Processors in a Tug-of-War

Month	2024 Price ($/cwt)	2023 Price ($/cwt)	Year-over-Year Change (%)
January	20.75	22.10	-6.1%
February	21.00	22.00	-4.5%
March	21.50	21.75	-1.1%
April	22.25	21.50	3.5%
May	23.00	21.90	5.0%
June	22.75	22.30	2.0%
July	23.25	22.50	3.3%
August (up to 23rd)	23.50	22.75	3.3%

Right now, the market is congested and busy. Spot milk commands a significant premium above Class III in the central area, ranging from $2.25 to $3.00 per cwt. The increase in spot milk prices is causing processors and bottlers to feel the squeeze.

On top of that, milk powder costs are rising. This week, CME spot nonfat dry milk (NDM) rose 2.75¢ to $1.2825 per pound, the most since January 2023. Whole milk powder (WMP) increased by 7.2% to its highest level since October 2022, while skim milk powder (SMP) recovered by 4%.

As schools reopen, the demand for milk in meal programs increases, and bottlers vie furiously to get supply. This ‘milk tug-of-war’ forces other processors to operate more lightly, complicating operations and raising expenses. Understanding this dynamic can help you anticipate and plan for potential disruptions in the supply chain.

Global Demand: China’s Milk Powder Purchases Spark U.S. Market Surge

The dairy market in the United States is heavily influenced by global demand. Recently, increased activity from Chinese purchasers has played a vital role. After more than a year of modest purchases, China’s participation in the August Global Dairy Trade (GDT) auctions pointed to decreased milk powder stocks in the nation. This rise in Chinese demand increased prices for whole milk powder (WMP) by 7.2% and skim milk powder (SMP) by 4%.

Such worldwide interest directly influences U.S. milk powder pricing, resulting in significant profits. For example, spot nonfat dry milk (NDM) prices increased to $1.2825 a pound, the highest level since January 2023. This considerable growth may be attributed to rising imports from China.

This increasing overseas demand improves the US dairy business as a whole. Export sales contribute considerably to overall market dynamics, mitigating the impact of decreases in local production. As Chinese whey imports increased by 13.2% in July and WMP imports behind the previous year’s amount by just 4.6%, US producers found a confident customer, helping to stabilize prices in the face of local concerns.

Butter and Cheese Frenzy: What’s Happening?

Let’s discuss the butter and cheese markets. Butter stocks fell quicker than expected in July, although there was still 7.4% more butter on hand at the end of the month than a year earlier. Prices fell, with CME spot butter down a cent to $3.13 per pound. Despite this, butter purchasers are still on edge, swapping over 100 cargoes in Chicago last week and another 54 vehicles on the spot market this week.

Cheese supplies are also under strain. Historically, cheese stockpiles in the United States grow by around 30 million pounds between the end of February and the end of July. This year, however, inventories have fallen by 50 million pounds. On July 31, the end-of-month cheese inventory was 1.4 billion pounds, the lowest since late 2020 and 5.8% lower than the previous year. CME spot Cheddar barrels closed at $2.10 per pound, a 15.5 percent loss, while blocks finished at $2.0375, a 6.25 percent decrease.

Navigating the Storm: Proactive Strategies for Dairy Farmers in Turbulent Times

Facing this daunting scenario, dairy farmers need proactive strategies to navigate these turbulent times. Here are some actionable tips to help you weather the storm:

Maximize Efficiency in Herd Management

Consider implementing advanced herd management software. These tools can accurately monitor each cow’s health, productivity, and breeding cycles. As herd sizes decrease (down to 9.325 million cows in July), ensuring every cow performs optimally is vital.

“Utilizing data-driven technologies can significantly enhance herd efficiency and milk yield,” says John Smith, dairy management expert at FarmTech Innovations.

Invest in Quality Feed

The nutritional value of your feed directly impacts milk production. Opt for high-quality, balanced diets catering to your herd’s needs. Grain prices have dipped (December corn closed at $3.91 per bushel; November soybeans at $9.37), making it an excellent opportunity to stock up on feed.

Monitor Cow Comfort

Stress can severely affect milk production. Ensure your cows have comfortable bedding, ample space, and a stable environment. Regularly check ventilation and temperature controls, significantly as temperatures drop seasonally, boosting milk output.

Strategize Cull Rates

Although culling less productive cows is necessary, consider a more selective approach. Focus on maintaining a younger, more efficient herd to maximize milk production per cow.

Optimize Milk Production

Studies show that certain practices, like frequent milking and ensuring cows have constant access to clean water, can increase yield. Remember to periodically review your milking equipment to ensure it’s working efficiently.

Tap into Market Opportunities

With spot milk prices soaring (trading at $2.25 to $3.00 per cwt over Class III), it’s a prime time to renegotiate contracts or seek new buyers willing to pay a premium. Consider diversifying your products if possible – cheese and butter prices fluctuate. Still, high-protein dairy products like whey are currently in demand.

“Farmers who adapt quickly to market shifts by diversifying their product lines often find more stable income streams,” advises Laura Anderson, market analyst at AgriMarket Insights.

Stay Informed and Collaborative

Keep up with industry reports and trends. Join local farmers’ groups or online forums to share insights and strategies. Sometimes, the best advice comes from fellow farmers who understand your unique challenges.

Remember, while the current landscape seems challenging, intelligent and proactive management can help you survive and thrive. Keep experimenting with different strategies and stay abreast of market trends to make informed decisions.

The Bottom Line

Milk output in the United States is declining at a record rate, posing substantial challenges for dairy producers. The problems are significant, with milk supply behind prior-year volumes by more than a year, fewer cows in the herd, and higher spot milk prices. Global demand movements, notably from China, and shifting dairy product prices add an extra complication. Maximizing herd efficiency, investing in quality feed, and monitoring cow comfort are critical for navigating these tumultuous times. Strategic market actions are also necessary. Staying educated and collaborative within the industry might offer the competitive advantage required.

Given these unprecedented obstacles, how will you adjust to guarantee the viability of your dairy farm?

Learn more:

Categories : Dairy Markets

Why New Zealand Dairy Farmers Should Brace for a Challenging Milking Season

Monday, August 19th, 2024

Why are New Zealand dairy farmers facing a tough season? How will moisture levels and market shifts impact your farm’s profits? Keep reading to find out.

Summary: Dairy farmers in New Zealand are navigating a challenging start to the 2024-25 milking season with a slight dip in milk production and solids. According to the Dairy Companies Association of New Zealand, initial June figures show a 0.9% decline in milk production and a 2.2% drop in milk solids compared to last year. Despite a higher opening milk price from Fonterra, these numbers raise concerns, particularly with industry expectations of further declines in July. However, hope persists as forecasts predict increased volumes later in the season. Farmers closely monitor moisture levels and weather patterns conducive to pasture growth, especially on the North Island. Internationally, New Zealand remains a crucial dairy exporter. Yet, shifts in global trade, particularly a reduction of exports to China, present new challenges. These changes underscore the importance of monitoring market dynamics and adapting to evolving conditions that could influence the dairy supply chain.

The June 2024-25 season saw a 0.9% drop in milk production and a 2.2% decrease in milk solids.
Fonterra’s opening milk price for the new season shows a slight increase.
Industry experts expect further declines in July, with an upswing in production predicted for August to October.
Current moisture levels on North Island and favorable weather forecasts support pasture growth.
Global trade shifts, notably reduced exports to China, create new market challenges for New Zealand’s dairy industry.
Farmers are cautious about the evolving market dynamics and the importance of adaptability in the dairy supply chain.

milking season, New Zealand, dairy producers, challenges, milk collections, milk solids, decline, income, Kiwi farmers, Fonterra, starting price, kilogram of milk solids, break even, additional feed, dairy businesses, overhead expenses, inflation, geopolitical uncertainty, forecast, control expenditures, market circumstances, profit, loss, vigilance, techniques, moisture levels, North Island, historical norms, Waikato region, South Island, pasture quality, milk output, global trade, dairy dominance, export patterns, alternative purchasers, global dairy prices, supply pools

The 2024-25 milking season presents challenges as output figures fall short of expectations. Are you prepared for what lies ahead? With milk collections down 0.9% and milk solids down 2.2% compared to the previous year [DCANZ Statistics], evaluating the elements that might affect your bottom line is essential. The dynamics of the local and global economies pose important considerations concerning our preparedness, and your involvement is critical in dealing with these issues.

Consider the following significant issues:

Mitigating the effects of diminishing milk solids production.
Addressing possible swings in global dairy demand, notably from China.
Adapting to changing weather patterns that may impact pasture conditions.

Being proactive and well-informed is an essential and potent tool in our arsenal as we confront these challenges. What strategies are you employing to stay ahead in this volatile landscape?

Season	Milk Production (Million Pounds)	Milk Solids (Million Pounds)
2022-23	515	46.1
2023-24	502	45.8
2024-25 (Forecast)	503	44.8

Are We Seeing the Dawn of a Dairy Dilemma?

As we begin the 2024-25 milking season, the preliminary numbers have aroused some questions. Milk output has declined by 0.9% since June 2023. While June usually sees the lowest collecting statistics of the year, the 2.2% decline in milk solids is especially concerning. We recognize that milk solids are a critical source of income for many Kiwi farmers, and we deeply appreciate your efforts and dedication in this area.

So, how does this affect our daily heroes? With milk solids down to only 44.8 million pounds from last year’s period, the financial consequences might be felt across their budgets. Given that supplementary feed is a significant expenditure for New Zealand growers, these lower margins may make it challenging to balance their books. Farmers may need help to break even this season, especially with rising overhead expenditures. We appreciate the passion and hard work you put into your farms and are here to help you during these difficult times.

Can Fonterra’s Milk Prices Save the Day?

Fonterra’s starting price for the 2024-25 season ranges between $7.25 and $8.75 per kilogram of milk solids (kgMS), essential for dairy producers looking to remain afloat. The $8/kgMS midpoint is slightly above the previous season’s final $7.90/kgMS midpoint.

However, Dairy Market News warns that a $8.31/kgMS price is required to break even. The rising cost of additional feed, a significant expenditure, has increased strain on dairy businesses. Overhead expenses follow closely, eroding business margins. Inflation and geopolitical uncertainty exacerbate the situation, making it challenging to forecast and control expenditures properly.

But there is hope. Fonterra’s starting price indicates a buffer if market circumstances are favorable. While it represents a tiny increase over the previous season’s halfway, it may assist farmers in managing these tumultuous times. Milk solids are the true breadwinner; even modest price changes might mean the difference between profit and loss. Fonterra’s milk prices’ potential benefits should give you hope and optimism in these challenging times.

With these stakes, farmers must stay vigilant and adjust their techniques to obtain the highest price for their milk solids. Increased solids and higher milk prices might be the difference between profit and loss. Do you understand the stakes now?

Is the Weather Playing Favorites With Dairy Farmers?

According to the National Institute of Water and Atmospheric Research (NIWA), moisture levels on both islands are encouraging. Soil moisture levels on the North Island are close to historical norms, notably in the lush Waikato region, which has the country’s most significant dairy area. This is good news for pastures since it ensures they stay lush and nutritious for grazing. However, the South Island has a significantly different story. The Canterbury area, home to 20% of New Zealand’s dairy cows, is experiencing drier weather than typical. This mismatch is problematic for farmers since dry circumstances may severely influence pasture quality and milk output. However, NIWA remains hopeful, forecasting average or above-average precipitation from August to October, which might relieve some of these worries and offer optimal grazing conditions.

Will La Niña’s Wet Spell Be a Boon for Waikato’s Dairy Farmers?

The National Oceanic and Atmospheric Administration predicts a 70% chance of a La Niña event forming in the following months. This meteorological phenomenon is likely to provide wetter-than-usual weather, especially in the northeastern parts of the North Island, including the Waikato area. Because Waikato is New Zealand’s most significant dairy region, this enhanced rainfall has the potential to boost grazing considerably. The moist pastures will benefit dairy producers by possibly increasing milk output and helping to offset any early-season milk solids deficiency. La Niña’s prolonged rains may boost soil moisture levels, resulting in a more stable environment for cattle. This is especially important since Waikato’s historical soil moisture standards are already favorable, and more precipitation would only increase the viability of dairy production in the area. Understanding these potential benefits can help you plan your operations more effectively.

Are Shifts in Global Trade Unsettling New Zealand’s Dairy Dominance?

New Zealand remains a dominant player in the global dairy market, esteemed as the top exporter of dairy products worldwide. The importance of these overseas sales cannot be emphasized since they are critical to the health of the nation’s dairy sector. However, changes in export patterns have started to alter the balance. Have you seen recent shifts in trading between China and Algeria?

New Zealand’s whole milk powder exports increased 7.4% year through June compared to January to June 2023. However, despite this increased tendency, sales to China and Algeria, who have long been the biggest consumers, have fallen dramatically. This decline is particularly concerning since China’s decreased imports amount to a significant volume—about 150,000 metric tons, or 1.3 million metric tons of milk equivalent [Rabobank Report]. Understanding these changes in export patterns can help you anticipate potential shifts in global dairy prices and adjust your strategies accordingly.

This structural transition, which refers to the ongoing changes in the global dairy market, is expected to cause considerable issues for New Zealand and the worldwide dairy industry. As more New Zealand goods flood the market, finding alternative purchasers becomes urgent but challenging. Given that milk output in the United States is declining and growth in Europe has halted, how will this shift in export destinations affect global dairy prices? The interaction may prevent prices from rising too quickly, preserving a fragile balance among smaller supply pools. Understanding this concept can help you navigate the changing market dynamics more effectively.

The Bottom Line

As the 2024-25 milking season begins, New Zealand’s dairy producers are dealing with a sluggish start. The minor decrease in milk output and the more alarming reduction in milk solids are accompanied by bleak outlooks for quick recovery. Fonterra’s price raises hopes, but breaking even remains a significant problem. Weather conditions seem encouraging in some areas, but variability prevails, adding another element of uncertainty. Global trade patterns are altering, putting further strain on a fragile equilibrium.

Farmers must remain aware and adaptable, using novel techniques to overcome growing prices and fluctuating markets. The future of New Zealand’s dairy business will depend on how well farmers adjust to these changing difficulties. With sustainability becoming a worldwide priority, how will you adapt to shifting conditions?

Learn more:

Categories : Dairy Industry

NZ Dairy Farmers Brace for Unexpected Drop in Milk Production: Surprising Market Shifts Ahead

Sunday, August 4th, 2024

Learn why NZ dairy farmers are seeing a surprise drop in milk production. Are you ready for the market changes ahead? Discover the shifts.

Summary: The New Zealand dairy industry is grappling with a slight decline in fluid milk production, driven by high interest rates and rising input costs. Despite this, opportunities in the global market are emerging, particularly in dairy exports and cheese production. By adopting innovative strategies—diversification, cost management, and exploring new markets—farmers can navigate these challenges. The sector’s future hinges on balancing economic pressures with strategic growth. While fluid milk output declines, there is potential in the growing demand for cheese. Faced with global competition and shifting dietary trends, New Zealand dairy producers must adapt. High interest rates and input costs strain profitability, but innovative strategies can offer better margins and market distinctiveness.

The dairy industry is experiencing a slight downturn in fluid milk production due to economic challenges.
High interest rates and rising input costs are the primary factors contributing to reduced profitability.
Opportunities in the global market, especially in dairy exports and cheese production, could offset some of these economic pressures.
Innovative strategies, such as diversification, cost management, and exploring new markets, are essential for navigating current challenges.
Balancing economic pressures with strategic growth is crucial for the future of New Zealand’s dairy sector.
There is increasing potential in the demand for value-added dairy products like cheese amidst declining fluid milk output.
Adapting to global competition and changing dietary trends will be vital for maintaining market distinctiveness.

New Zealand’s fluid milk output is expected to fall somewhat, which is an unexpected development. While tiny, this slight alteration has enormous repercussions for the dairy sector, which is the backbone of New Zealand’s economy. Despite its small size, the expected fall in milk output might have far-reaching consequences, impacting everything from farm revenue to export potential. Understanding the underlying reasons and possible ramifications of this production decline is critical for dairy producers. This information enables them to make educated choices and react to changing market conditions, ensuring their businesses stay sustainable and competitive in the years ahead.

Will New Zealand’s Dairy Farmers Survive the Predicted Fluid Milk Production Drop?

Despite the modest but evident change in New Zealand’s dairy market, our dairy farmers have shown incredible resilience. Despite worldwide solid demand, local fluid milk output is expected to fall somewhat. Several indicators show the industry’s complicated state: high lending rates and rising input prices impose enormous strain on farmers, while export-focused efforts have had mixed outcomes.

While many dairy sectors face constraints, there is still tremendous room for expansion. Cheese consumption, for example, which was stable in 2023, is predicted to increase in 2024. This increase is due to increased earnings and the return of tourists eating out at pre-pandemic levels. Favorable weather conditions have increased pasture availability, which is somewhat countered by farmers’ financial demands.

Globally, New Zealand’s dairy business faces competitive challenges. Argentina is expected to modify its milk production dynamics in reaction to rising inflation via export methods such as a unique blended exchange rate for agricultural exports. Similarly, Australia’s fluid milk output is expected to expand to 8.8 million tons by 2024, owing to favorable weather circumstances. New Zealand’s dairy producers must be watchful and adaptable in this setting. This flexibility is critical because it allows them to balance local issues with global market possibilities, ensuring their operations stay competitive.

Adapting to Unpredictable Times: New Zealand’s Fluid Milk Production Faces Multifaceted Challenges

Several factors contribute to the predicted decrease in New Zealand’s fluid milk output. The most notable is the increasingly unpredictable environmental circumstances, which have presented significant problems to dairy producers. Weather patterns, ranging from droughts to heavy rains, affect pasture availability, milk supply, and quality. These harsh circumstances highlight the need for resilient and adaptive agricultural systems.

Another critical factor is the changing landscape of consumer demand. Traditional dairy products face fierce competition as global dietary trends move toward plant-based alternatives and a greater emphasis on sustainability. This shift is especially prominent in Western countries, where rising health and environmental concerns encourage reconsidering traditional dairy consumption.

The worldwide market dynamics cannot be neglected. New Zealand’s dairy business is inextricably related to the more significant economic climate, which is marked by high interest rates and growing input prices. Financial difficulties, worldwide rivalry, and shifting commodity prices lead to decreased profitability and output levels. Furthermore, the strategic shift to higher-value dairy products such as butter, cheese, and cream reallocates resources away from fluid milk production, indicating a purposeful effort to secure better margins and market distinctiveness.

The Harsh Economic Truths Facing Dairy Farmers: Navigating the Complexities of Declining Fluid Milk Production

The economic ramifications for dairy producers from the predicted fall in fluid milk output are complex and need a detailed understanding. Decreasing production might result in significant income shifts for small and large companies. Lower production volumes may result in higher unit costs since fixed expenditures such as facility upkeep and labor stay constant or rise due to increased input prices. As a result, profit margins may shrink, forcing farmers to look into other options for sustaining financial stability.

Revenue Shifts: Small-scale farmers may be disproportionately impacted since their small production capacity leaves less space to absorb increasing expenses. Larger enterprises, on the other hand, may benefit from economies of scale to alleviate some financial strain, but they are not immune to larger economic forces. Reduced fluid milk supply may force the sector to shift to more value-added goods, such as butter and cheese, which might somewhat offset revenue losses but need extra investment and skill.

Cost Implications: Rising input prices for feed, fertilizers, and electricity exacerbate the problem. As interest rates rise, debt service becomes more costly, reducing company margins. Small farmers, who often operate on short cash flows, may face increased risks of financial difficulty or even liquidation.

Profitability Concerns: To stay competitive and sustainable, small and big dairies would most likely need to simplify operations, use efficiency-enhancing technology, or diversify their product offers. Some may consider focusing on specialized markets or expanding into organic and specialty dairy areas. However, each strategy has its own set of hazards and investment needs.

Finally, despite the complexity of the difficulties, there are chances for adaptability and creativity. The capacity to negotiate these economic challenges will determine New Zealand’s dairy sector’s resilience and future viability.

Innovative Strategies for Navigating the Evolving Dairy Industry Landscape

Adapting to the changing needs of the dairy sector requires creative techniques and a proactive attitude. Here are some practical measures New Zealand dairy farmers can consider adopting:

Diversification: Spreading Risk and Increasing Income Streams

Diversifying product offers may provide new income streams while reducing reliance on fluid milk. Farmers might explore diversifying into cheese, yogurt, butter, or value-added goods such as specialty cheeses for specific markets. This protects against shifting milk costs and meets growing customer demand for diverse dairy products.

Cost Management: Streamlining Operations for Efficiency

Effective cost management is essential to preserving profitability despite variable production levels. This includes regularly assessing operating expenditures, optimizing feed and resource consumption, and investing in automation when possible. Precision farming equipment may assist in monitoring herd health and production, lowering waste, and increasing overall efficiency.

Exploring New Markets: Expanding Beyond Traditional Boundaries

Global dairy markets constantly change, and finding new export prospects may be a game changer. Building contacts with foreign customers, knowing regulatory needs in various locations, and leveraging trade agreements may lead to profitable markets in Asia, Europe, and beyond. Furthermore, selling organic or grass-fed dairy products might attract health-conscious customers all over the globe.

These techniques need meticulous preparation and an eagerness to experiment. Nonetheless, they provide a solid foundation for navigating the risks of fluid milk production and ensuring a sustainable future for New Zealand’s dairy producers.

The Future of New Zealand’s Dairy Sector Amid Market Dynamics: Challenges and Opportunities

The long-term forecast for New Zealand’s dairy sector in the face of current market upheavals provides a mix of difficulties and possibilities that can dramatically impact its future. The possible drop in fluid milk output must be balanced against the growing worldwide demand for diverse dairy products. An increased focus on sustainability and customers’ rising taste for value-added dairy products such as organic and specialty cheeses might accelerate sector reform.

One conceivable possibility is that the industry shifts its focus to increased production and efficiency to compensate for decreased milk quantities. Advancements in technology, such as precision farming and dairy management software, may lead farmers to adopt more sustainable data-based methods. Concurrently, the pressure to reduce greenhouse gas emissions is expected to increase, forcing farmers to incorporate environmentally friendly measures into their operating frameworks.

Another plausible outcome is intentional market growth and diversification. Exploring new overseas markets, particularly in Asia, might provide profitable opportunities for New Zealand’s dairy exports. Leveraging Free Trade Agreements (FTAs) and strengthening trade links will be crucial to this strategy. Creating non-dairy alternatives and leveraging the plant-based trend might provide further development opportunities.

While implementing these revolutionary techniques, the sector must avoid traps such as global economic changes, climatic variability, and competitive pressures from other dairy-producing countries. Australian fluid milk output, for example, is expected to grow, increasing competition. To survive and prosper in the changing global dairy scene, New Zealand’s dairy sector must maintain its resilience, implement adaptive tactics, and adopt a forward-thinking approach.

The Bottom Line

As we have navigated the complexity and uncertainties confronting New Zealand’s dairy producers, it is evident that both difficulties and possibilities exist. The minor drop in fluid milk output, caused by high interest rates and increased input prices, emphasizes the need for strategic adaptation. Diversification, cost control, and expansion into new markets are buzzwords and critical tactics for success in today’s unpredictable climate. While their efficiency varies, the government’s policies provide a framework for dairy farmers to maneuver to protect their livelihoods. To ensure the future of their business, dairy farmers must remain aware, adaptable, and aggressive in implementing new solutions. Adopting these strategies will assure survival while paving the road for long-term development and success in the ever-changing dairy business.

Learn more:

Categories : Dairy Markets

June’s Shocking Dairy Cow Culling Plummet: Essential Insights

Wednesday, July 31st, 2024

Find out what caused the massive drop in dairy cow culling this June and how it could impact your farm. Are you ready for the shifts in the dairy market?

Summary: Dairy cow culling has seen a 30% decline in June, raising concerns among farmers about milk pricing and herd management tactics. Historical culling rates have fluctuated, with producers increasing culling during economic slumps or low milk prices to save money or reducing culling to preserve herd size and optimize output when milk prices are high. Understanding these trends helps farmers make more educated herd management choices, maintaining the sustainability and profitability of their enterprises. The decline in culling rates is attributed to improved herd management practices, market demand changes, and advancements in veterinary care. Farmers are experiencing relief and new operational issues, with culling down 14.5% from last year as of mid-July. Financially, lower culling rates often lead to cheaper replacement expenses, but these savings are offset by the need for improved herd management to sustain production levels in older herds. The decline in culling can last due to factors like market demand, import activity, and global and local market stability. To adapt, focus on herd health, adopt preventive measures, improve breeding programs, and make smart financial planning.

Dairy cow culling has decreased by 30% in June, impacting milk pricing and herd management strategies.
Historical fluctuations in culling rates correspond to economic conditions and milk price changes.
Improved herd management practices, market demand changes, and advancements in veterinary care contribute to reduced culling rates.
While lower culling rates slash replacement costs, maintaining productivity in older herds poses new challenges.
The 14.5% decline in culling as of mid-July suggests a continuing trend influenced by market and environmental factors.
Farmers should prioritize herd health, adopt preventive measures, enhance breeding programs, and implement smart financial planning to navigate the shifting culling landscape.

In June, dairy cow culling dropped by an astounding 30%, shaking up the dairy business and sparking innumerable concerns among farmers. This significant reduction is more than a statistic; it represents a change that might affect everything from milk pricing to herd management tactics. Understanding why this trend is occurring and what it means for your farm could make all the difference in your future planning, as the significant decrease in dairy cow culling necessitates re-evaluating herd maintenance and production strategies, pointing to a possible short-term anomaly or a longer-term industry shift.

Month	Dairy Cows Culled (Head)	Change from Previous Year (%)	Milk Production (Million Pounds)
January	245,000	-8%	17,285
February	230,000	-10%	16,740
March	210,000	-12%	18,110
April	208,000	-9%	17,500
May	189,000	-15%	19,225
June	186,400	-30%	18,930

Shocking 30% Plunge in Dairy Cow Culling: What Does It Mean for Your Farm?

Dairy cow culling is the removal of cows from the dairy herd. This may happen for various reasons, including insufficient milk supply, health problems, limited fertility, or elderly age. It is an important management technique for ensuring the production and general health of the dairy herd. By eliminating underproductive or sick cows, farmers may concentrate resources on cows that contribute more efficiently to milk production.

Historically, culling rates have fluctuated significantly. For example, during an economic slump or low milk prices, producers may increase culling to save money. Conversely, when milk prices are high, there may be a need to reduce culling rates to preserve herd size and optimize output. Statistical data from the last few decades show how these rates have fluctuated in reaction to market situations, feed prices, and advances in dairy technology. As of the week ending July 13, 1,481,400 heads had been culled, representing a 14.5% decline over the previous year.

Understanding these trends allows farmers to make more educated herd management choices, maintaining the sustainability and profitability of their enterprises. With developments in dairy farming practices and improved health monitoring systems, culling has become more deliberate to achieve optimum herd performance.

June Ushers in Unprecedented Drop in Dairy Cow Culling: What the USDA’s Latest Figures Reveal

The USDA’s most recent data show some eye-opening results for June. Dairy cow culling fell dramatically, with just 1,481,400 heads slaughtered, a 14.5% decrease from the previous year (USDA). The total dairy cow population remained stable at 9.335 million head compared to prior trends. These numbers highlight the surprising shifts in market dynamics since we typically anticipated a greater culling rate during this time.

Dramatic Decline in Culling Rates: Unpacking the Key Factors

Month	Dairy Production (Million lbs)	Call Rates (Head)
January 2024	18,200	250,000
February 2024	17,900	230,000
March 2024	18,300	220,000
April 2024	18,000	210,000
May 2024	18,100	191,800
June 2024	17,800	186,400

There are a host of factors contributing to this noteworthy decline in dairy cow culling rates. Let’s break it down:

Improved Herd Management Practices: Optimizing herd management procedures is a key component contributing to lower culling rates. Farmers are becoming more skilled at nutrition planning and reproductive methods, resulting in healthier and more productive cattle. Targeted nutrition and improved breeding strategies are dramatically reducing health concerns in herds.
Changes in Market Demand: Market conditions have changed, affecting culling choices. For example, a growing demand for dairy products such as yogurt and sour cream encourages producers to keep more enormous herds to fulfill demand. Yogurt was the third most promoted conventional dairy item and the top organic dairy commodity, demonstrating strong market demand.
Advancements in Veterinary Care: Veterinary treatment has evolved dramatically, providing more effective preventative and therapeutic options for common cattle illnesses. This innovation minimizes the need to cull cows due to health concerns. According to the University of Wisconsin’s Dairy Cattle Health Program, producing more effective immunizations and treatments has improved overall herd health.

Reducing dairy cow culling rates requires effective herd management, market-driven choices, and excellent veterinarian care. These developments help both individual farmers and the dairy sector as a whole.

How Slashing Dairy Cow Culling Rates Impacts Your Wallet, Herd Health, and Milk Output

Month	Milk Price ($/cwt)	Feed Cost ($/cwt)	Margin ($/cwt)
January 2024	19.50	11.25	8.25
February 2024	19.00	11.00	8.00
March 2024	18.75	11.50	7.25
April 2024	18.50	11.75	6.75
May 2024	18.25	11.80	6.45
June 2024	18.00	12.00	6.00

The fall in dairy cow culling rates has several ramifications for dairy producers, including financial stability, herd health, and milk production levels. Farmers are experiencing relief as well as new operational issues, with culling down dramatically (14.5 percent from last year as of mid-July).

Financial Implications
Financially, a lower culling rate often translates into cheaper replacement expenses. According to a well-known dairy industry expert, farmers pay less for new replacements when fewer cows are killed, which may result in significant long-term cost savings. This is especially useful in a year with volatile feed costs and other economic stresses. However, these savings are offset by the requirement for improved herd management to sustain production levels in an older herd.
Herd Health
Maintaining excellent herd health becomes critical since older cows may need more frequent health monitoring. Vet expenditures have risen somewhat since older cows need more care, but the savings from not purchasing young heifers balance this. Our elder cows are like family members on our farm; when appropriately cared for, they provide high yields. This attitude was reflected in a recent industry analysis, which emphasized the need to combine elder cow care with farm productivity.
Milk Production
The effects on milk production vary. Some states, such as Wisconsin, recorded an increase in output—by 25 million pounds. Other states, such as Minnesota, had a tiny 1.0% dip. The disparity emphasizes the importance of regional management strategies and feed quality. An elderly herd may be just as productive if adequately managed. Focusing on diet and getting frequent health checks is critical for maintaining milk supply.

This change in culling procedures creates both possibilities and obligations for dairy producers. While the first financial relief is evident, the commitment to keeping an older herd healthy and productive emphasizes the continuous need for adaptive management practices.

Can the Decline in Dairy Cow Culling Last? Key Market Trends to Watch

Market Trend	Details
Smaller Milking Herd	The national herd size continues shrinking, influencing milk production and culling rates.
Availability of Replacement Heifers	The limited supply of replacement heifers is a critical factor affecting culling decisions.
Milk Income Margins	Improved milk income margins, albeit slight, are contributing to reduced culling rates.
Profitability of Milk Production	Declining profitability since early 2023, with lower farm-gate prices and high input costs, remains a significant concern.
Effects of El Nino	Weather patterns like El Nino are impacting milk production and culling decisions.
Seasonal Declines in Milk Output	Milk output is showing seasonal declines, particularly in Western Europe.
Temporary Milk Delivery Increases	Temporary gains in milk deliveries early in 2024 are not expected to be sustained, influencing market dynamics.

Several variables may impact whether the drop in dairy cow culling will continue. One crucial factor to consider is market demand for dairy products. According to the USDA, Class I demand is now in a seasonal slowdown due to school closures, but it is expected to recover once schools reopen. Another area to examine is import activity from important dairy customers, such as China, where whey imports were up 6.2%, perhaps reflecting higher worldwide demand (USDA).

Experts from the National Milk Producers Federation predict that if the milk price and production cost trends continue, culling rates and total herd numbers will experience modest changes but remain constant (NMPF). This is dependent on global and local market stability, especially in cheese demand, which is stated to be stable to lighter, with availability varying from balanced to tighter (USDA).

This situation presents opportunities for improved herd health via less aggressive culling and more targeted management of productive cows. However, issues such as sustaining profitability with shifting feed and operating expenses persist. Innovative feed management and selective breeding strategies may be critical in managing these challenges.

Adapting Your Strategies in Response to the Shifting Dairy Culling Landscape

As these dramatic shifts in culling rates reshape the dairy landscape, it’s crucial to pivot your strategies to safeguard and optimize your operation:

Optimize Herd Management

Focus on Herd Health: Prioritize preventive health measures. Regular veterinarian check-ups and a thorough immunization program may help maintain your herd healthy and avoid the need for culling.
Breeding Strategies: Given the difficulties of obtaining replacements, improving your breeding program is critical. Consider adopting sophisticated reproductive technology, such as sexed semen, to boost female offspring.

Smart Financial Planning

Budget for Uncertainty: Culling rates might fluctuate, influencing cash flow. Create a financial buffer to accommodate unforeseen changes in market dynamics.
Cost Analysis: Consider the cost-benefit of retaining lower-yield cows vs the cost of feeding them, mainly when feed costs fluctuate. Use financial simulation tools to forecast various eventualities.

Stay Informed About Market Trends

Subscribe to Market Reports: Keeping up with industry publications and reports can provide valuable insights. Websites like TheBullvine.com offer timely updates and analysis.
Engage in Community Forums: Join dairy farmer associations and online communities to stay connected with peers and industry experts. Participate in farm forums for real-time discussions and advice.

Adapting to fluctuating culling rates requires innovative herd management, careful financial planning, and attention to market trends. Use these practical recommendations to guide your dairy company through these changing times.

The Bottom Line

The dairy business is seeing a dramatic transformation, with dairy cow culling rates dropping by 30% unexpectedly, providing farmers with both difficulties and opportunities. We discovered that this drop is driven by a smaller milking herd, scarce and expensive replacement heifers, and somewhat increased milk-earning margins. Farmers must wisely manage their herds, strategically plan their budgets, and closely monitor market trends to negotiate these changing dynamics effectively. Keeping up with industry trends and reacting to them is necessary and critical for prospering in the face of uncertainty. As you look forward, remember, “The key to success is not predicting the future, but preparing for it.” How can you prepare now to take advantage of tomorrow’s opportunities? Use this opportunity to develop a plan that tackles urgent difficulties while positioning your farm for long-term success. Embrace the changing environment with confidence and adaptation.

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Categories : Dairy Markets

The Hidden Crisis: Why U.S. Dairy Farms Are Disappearing Faster Than Ever!

Monday, July 29th, 2024

U.S. dairy farms have shrunk by two-thirds while milk production rose—find out why this matters for farmers!

Summary: The decline of U.S. dairy farms over the past generation is staggeringly evident, with two-thirds disappearing, yet milk production has paradoxically surged by a third. This trend is driven by technological advancements and economic pressures, pushing family-operated farms to the brink. As small farms struggle against unsustainable milk prices and industry consolidation, the remaining farms leverage innovations such as automated milking systems and genetic breakthroughs to boost production. With regions like the Midwest and Northeast hardest hit—Wisconsin alone lost nearly half its dairy farms from 2003 to 2020—the story underscores an urgent need for new strategies to ensure a sustainable and thriving future for all stakeholders in the dairy industry.

Key Takeaways:

Family dairy farms in the U.S. have drastically diminished, with two out of three vanishing within a generation.
Despite the decline in the number of farms, milk production has increased by a third due to technological advancements.
Innovation and efficiency improvements are helping remaining dairy farms thrive, even as smaller farms disappear.
Small dairy farms face significant economic challenges, often driven by market pressures and consolidation within the industry.
Many small farms struggle with succession planning and engaging the next generation to continue the farming tradition.
Crisis in the dairy industry necessitates policy reforms, better access to credit and capital, and community support to ensure sustainability.
Consumer awareness and advocacy play crucial roles in championing the cause of small dairy farms and ensuring their survival.
The dairy industry’s future hinges on navigating economic pressures, leveraging new technologies, and supporting farming communities.

You may find it difficult to believe, yet two of every three dairy farms in the United States have closed during the last generation. You read it right: milk output has climbed by a remarkable one-third despite the tremendous migration. How can this be? In 1987, the U.S. had 202,068 dairy farms, but by 2017, the number had decreased to 54,000, according to the USDA. This contradictory pattern is more than a statistical aberration; it is a significant change with far-reaching repercussions for the dairy sector, rural economies, and food security. Understanding the forces driving this shift may help us navigate the future of agriculture. Furthermore, it gives insight into broader economic and technical developments in American agriculture, such as consolidation and automation.

Year	Number of Dairy Farms	Trend in Number of Dairy Farms	Number of Dairy Cattle (in millions)	Trend in Number of Dairy Cattle
2004	86,000	Declining	9.0	Steady
2008	69,890	Declining	9.2	Increasing
2012	51,481	Declining	9.3	Increasing
2016	40,219	Declining	9.4	Increasing
2020	34,187	Declining	9.4	Steady
2024	Estimated 29,000	Declining	9.5	Steady

The Astonishing Decline of Family Dairy Farms: What’s Happening Behind the Scenes?

The previous several decades have been revolutionary for the United States dairy business, with a significant decline in dairy farms. Since the 1970s, small, family-owned farms have decreased by approximately two-thirds. This considerable drop may be attributed to many main variables. Economic constraints have played an important part; as production costs have grown, it has been more difficult for smaller farms to compete with larger enterprises. Technological improvements have also transformed the sector. Innovations in milking technology, feed efficiency, and animal health have enabled more giant farms to attain previously unmatched production. For example, an ordinary cow now produces almost four times as much milk as it did in the 1950s.

Furthermore, consumer choices have altered market dynamics. An increasing demand for organic and sustainably derived goods frequently necessitates alternative manufacturing techniques and scale. These changes have contributed to the consolidation of dairy farms, favoring larger enterprises that can better absorb these complexity and expenses.

Survive and Thrive: The Dairy Industry’s Hidden Secret to Milk Production Boom Amid Farm Disappearance

State	Decline in Dairy Farm Numbers (2003-2023)
Wisconsin	58%
Pennsylvania	45%
New York	40%
California	35%
Minnesota	32%

The dairy business in the United States is exhibiting a paradoxical rise and collapse. According to the most recent USDA statistics, the number of dairy farms in the United States has plummeted, with two out of every three disappearing during the last generation. In sharp contrast, milk output has increased by one-third during the same time (USDA). Despite the decreasing number of farms, technological developments and better agricultural methods have allowed existing dairy farms to enhance output. A significant illustration of this efficiency is that the typical dairy cow now produces nearly four times more milk than its equivalent in the 1950s.

The decline has hardest hit the Midwest and Northeast regions in dairy farms. For example, Wisconsin, known as ‘America’s Dairyland,’ lost nearly half of its dairy farms from 2003 to 2020. New York experienced a similar 47% drop during the same period, while California, despite leading in milk production, saw its dairy farms reduced from around 2,100 in 2003 to about 1,300 in 2020. Texas and Pennsylvania also faced steep declines; Texas dairy farms plummeted from 1,200 to just 351 (a 71% drop), and Pennsylvania saw a 45% reduction in the number of dairy farms.

Technological Triumphs Propel Remaining U.S. Dairy Farms to New Heights Amid Decline

While the number of dairy farms in the United States has decreased, technological developments have increased the output of those at record levels. The automated milking system (AMS) is a remarkable breakthrough in transforming farmers’ herd management practices. This technology reduces human effort, enables more frequent milking, and carefully monitors each cow’s health and productivity, resulting in significant gains in milk supply.

In addition to AMS, new feed formulations have had a significant effect. Modern feed technology contains precise nutritional ratios suited to dairy cows’ demands. This accurate feeding leads to healthier cows and, as a result, increased milk output. A well-balanced diet improves digestive efficiency and milk quality, so every drop counts.

Furthermore, genetic breakthroughs in dairy cattle have proven game changers. Dairy cows nowadays are significantly more productive than their ancestors because of selective breeding and genetic innovation. Genetic developments have allowed for the breeding of cows that give more milk and are more resistant to common diseases, increasing their productivity and efficiency.

These technical breakthroughs guarantee that, even as the number of dairy farms falls, total output rises, securing the industry’s future while maintaining a high milk quality and sustainability level.

The Economic Storm Farming Families Didn’t See Coming: Why Small Dairy Farms Are Disappearing in Droves

Year	Number of Small Dairy Farms	Percentage Decline
2000	70,375	N/A
2005	60,000	-15%
2010	49,700	-17%
2015	40,000	-19.5%
2020	30,375	-24%

The economic forces driving dairy farm consolidation are diverse, including changing milk prices, growing production costs, and the uncertain dynamics of international commerce. Over the last several decades, milk’s average price per hundredweight (cwt) has fluctuated significantly, affecting dairy producers’ revenue predictability. This economic unpredictability adds to the financial burden on smaller farms, which sometimes need more capital reserves to weather extended periods of low pricing.

Production costs have also risen, driven by rising feed prices, labor expenses, and the need for sophisticated agricultural technologies. According to the United States Department of Agriculture (USDA), feed expenditures may account for up to 60% of a dairy farm’s overall production costs. This high expense makes it easier for smaller farms to stay sustainable while expanding their operations.

International commerce is also quite important. Global market developments and trade policy significantly impact the U.S. dairy business. Tariffs, trade agreements, and competitive pricing of dairy products from nations such as New Zealand and the European Union all influence local milk costs. The North American Free Trade Agreement (NAFTA) and its successor, the United States-Mexico-Canada Agreement (USMCA), have transformed the landscape by opening up new markets and bringing competition from imported items, sometimes with cheaper manufacturing costs.

These economic incentives encourage consolidation, with smaller farmers selling out or merging with more giant enterprises to gain economies of scale. Consolidation helps surviving farmers boost productivity and profitability in an increasingly competitive economy.

Pushed to the Breaking Point: Can Small Dairy Farms Survive the Industry’s Ruthless Evolution?

Year	Average Herd Size
2003	100
2008	120
2013	150
2018	200
2023	250

The reality for small dairy farmers is clear and frequently cruel. These family-run companies, such as the Wisconsin farm with 500 cows that sustain three generations, have battled to keep up with the dairy industry’s tectonic transformations. One crucial problem is the enormous amount of output necessary to stay sustainable. Advances in dairy farming technology have allowed more giant farms to boost production per cow tenfold, making it possible for smaller farms to compete by making matching expenditures, which are frequently prohibitively costly.

Furthermore, small farms are disproportionately affected by fluctuating milk prices and increased operating expenses. For example, some small farms that depend primarily on human labor may need help transferring to automated systems, which may be a substantial hurdle to obtaining the economies of scale required to remain viable. The emotional toll is also significant; for example, Emily, a fourth-generation farmer and U.S. Navy veteran, was forced to work as a heavy equipment operator owing to financial constraints on her family farm.

Despite these challenges, various assistance programs and efforts are in place to help small farmers maintain their competitiveness. The USDA gives grants and loans to small and medium-sized farms. The Beginning Farmer and Rancher Development Program (BFRDP) provides resources and instruction to young farmers, assisting them in developing skills necessary for contemporary agricultural techniques. Furthermore, municipal and state organizations routinely provide training and financial assistance to help small farm owners embrace new technology and enhance efficiency.

Furthermore, consumer awareness and direct-to-consumer sales have helped many small dairy farms survive. Small farms may gain higher price points for their goods by promoting them as artisanal or organic, reflecting the quality and attention they put into their operations. Community Supported Agriculture (CSA) programs and farmers’ markets enable small farms to engage directly with customers, encouraging loyalty and generating consistent cash sources.

Although small dairy farms confront significant obstacles, they are not without hope, thanks to a mix of assistance. With focused initiatives, inventive marketing methods, and a persistent dedication to quality, many are surviving and, in some instances, thriving in the ever-changing dairy sector environment.

The Dairy Industry at a Crossroads: Navigating Challenges and Seizing Opportunities for a Sustainable Future

Looking forward, the dairy sector in the United States is at a crossroads, with a combination of problems and possibilities that can significantly impact its future terrain. One possible trend is rising customer demand for organic and specialized dairy products. Organic milk, for example, has witnessed an increase in demand as more people become health-conscious and ecologically aware. This move creates a potential niche market for dairy producers prepared to modify their techniques to fulfill organic certification requirements.

Furthermore, sustainability is becoming a crucial concern, with consumers and activist organizations calling for more environmentally friendly agricultural techniques. Methane reduction methods, rotational grazing, and water conservation strategies are examples of innovative approaches in this field. These sustainable approaches appeal to consumer tastes while providing farmers with long-term advantages such as cost savings and increased agricultural resilience.

Technology’s importance should be considered. Advanced dairy management software, automated milking equipment, and precision agricultural technologies are poised to improve the industry’s efficiency and output significantly. These advances might help smaller farms compete more successfully by lowering labor costs and increasing milk output.

New business models and diversification techniques may arise as young people get increasingly involved in farming. Agritourism, direct-to-consumer sales, and collaborations with local food systems are ways the dairy business may adapt to suit current needs while remaining profitable.

Finally, legislative reforms and government assistance will be critical factors. Incentives for sustainable practices, subsidies for technology adoption, and training initiatives to educate the next generation of farmers are all essential steps that guarantee the U.S. dairy business will survive and flourish in the years ahead.

The Bottom Line

Despite the massive collapse of family dairy farms, the U.S. dairy business has grown milk output, exhibiting remarkable resilience and ingenuity. Fewer farms have adopted technology and scalability to improve efficiency, yet small farmers face constant economic pressures, resulting in tough decisions and financial misery. The developing capabilities of the dairy business in the United States emphasize the need for adaptation for survival. As the sector faces turbulence, stakeholders—farmers, consumers, and legislators—must remain aware, involved, and aggressive in addressing continuing problems and opportunities, advocating for fair policies, and recognizing agriculture’s vital role.

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Categories : Dairy Industry

Understanding the Drop in Southeast Asia’s Dairy Imports from the U.S.

Wednesday, July 17th, 2024

Learn why Southeast Asia is buying less dairy from the U.S. despite economic growth. Is it due to a stronger dollar and no trade deals? Find out more.

Despite robust economic development, U.S. dairy exports to Southeast Asia have unexpectedly decreased. In the first five months of 2024, exports to the Philippines, Indonesia, Vietnam, Malaysia, Thailand, and Singapore declined 5%, reaching 440.7 million pounds, compared to the same time in 2023. This is the lowest export volume to the area since 2019, with significant reductions in nonfat dry milk and lactose exports. This decrease is surprising considering the region’s outstanding economic development, such as Vietnam’s 6.4% GDP spike in the first half of 2024 and the Philippines’ 5.7% GDP gain in Q1. Thailand, Malaysia, Indonesia, and Singapore all saw substantial increases.

Country	NDM Exports (2023) in pounds	NDM Exports (2024) in pounds	Lactose Exports (2023) in pounds	Lactose Exports (2024) in pounds
Philippines	50,000,000	46,000,000	16,000,000	13,500,000
Indonesia	40,000,000	37,000,000	18,000,000	15,200,000
Vietnam	30,000,000	27,500,000	14,000,000	11,500,000
Malaysia	25,000,000	23,000,000	12,000,000	10,000,000
Thailand	20,000,000	18,000,000	10,800,000	9,000,000
Singapore	10,000,000	9,700,000	9,500,000	8,600,000

The Staggering Decline of U.S. Nonfat Dry Milk Exports to Southeast Asia

The decrease in nonfat dry milk (NDM) and skim milk powder shipments to Southeast Asia is notable. USDA figures reveal an 8% decrease to 211.2 million pounds in the first five months of 2024 compared to the same time in 2023. This drop is part of a long-term pattern, with US NDM exports being flat since 2020. According to Betty Berning, an analyst with the Daily Dairy Report, the fall is partly due to losing market share. “New Zealand has ramped up its annual shipments to Southeast Asia in 2022 and 2023,” Berning says. Despite heightened competition, overall sales from the top 15 worldwide exporters have dropped since 2020, indicating more significant market issues for U.S. exporters.

Concurrently, U.S. Lactose Exports to Southeast Asia Face a Significant Downturn

Concurrently, U.S. lactose shipments to Southeast Asia have dropped significantly. From January to May 2024, shipments plummeted by more than 16%, reaching barely 72.8 million pounds. This reduction compares sharply with the same time in 2023, illustrating more significant issues in the United States dairy export markets. Year-over-year sales figures for 2023 reflect a similar pattern, highlighting the persistent challenges for American lactose exporters in these expanding regions.

The Economic Boom Amidst Dwindling Dairy Imports: A Southeast Asian Paradox

The surprising drop in U.S. dairy exports contrasts strongly with Southeast Asia’s economic development. Vietnam’s GDP increased by 6.4% in the first half of 2024, Thailand’s by 1.5% in the first quarter, and the Philippines’ by 5.7% over the same period. Despite this growth, the demand for dairy has yet to follow up. A greater GDP indicates more consumer spending, which frequently boosts milk imports. However, this has not occurred in Southeast Asia, providing a challenge for U.S. exporters looking to restore market dominance.

The Currency Conundrum: How a Stronger U.S. Dollar Impacts Dairy Trade with Southeast Asia

A rising U.S. dollar influences global commerce by affecting importing countries’ buying power. When the dollar rises, products priced in dollars become more costly for customers with weaker currencies. This dynamic is essential for the dairy industry. A rising dollar diminishes buying power in expanding Southeast Asian countries, raising the cost of U.S. dairy goods. Importers must pay more local currency for the same items, making U.S. dairy exports such as nonfat dry milk and lactose less desirable than cheaper alternatives.

New Zealand, a significant player in the global dairy industry, benefits from free-trade agreements with numerous Southeast Asian nations, which reduce tariffs and prices. In contrast, the United States needs such accords, leaving its goods at a price disadvantage compounded by the strong currency. This competitive advantage makes New Zealand dairy products more enticing to budget-conscious importers. Unless U.S. exporters can provide cheaper pricing or achieve new trade agreements, recovering market share in Southeast Asia would be tough.

A Price Too High: How U.S. Dairy’s Premium Costs Are Hindering Exports to Southeast Asia

Pricing strategy is another significant barrier to U.S. dairy exports to Southeast Asia. Since January 2023, U.S. dairy goods have often been priced more than overseas rivals. This pricing disparity has hindered Southeast Asian importers, who value cost-effectiveness, from purchasing American items. Even when U.S. prices were reduced, the reductions were insufficient to change purchase patterns. The absence of convincing pricing benefits makes it difficult for U.S. exporters to regain market dominance.

The Bottom Line

The decline in U.S. dairy exports to Southeast Asia is undoubtedly due to several interrelated reasons. The most urgent are:

The loss of market share to New Zealand
The negative impact of a higher U.S. currency on buying power
The uncompetitive pricing of U.S. dairy goods

Despite substantial economic expansion in Southeast Asia, these factors have significantly dropped demand for American dairy exports. The lack of free-trade agreements exacerbates the problem, making U.S. goods less appealing than those from rivals like New Zealand. As a result, unless the United States can change its pricing approach to provide much reduced prices, the route to regaining its prior export quantities remains difficult.

Key Takeaways:

For the first five months of 2024, U.S. dairy exports to Southeast Asia decreased by 5%, marking the lowest level since 2019.
U.S. nonfat dry milk (NDM) and skim milk powder exports fell 8% compared to the first five months of 2023.
U.S. lactose exports to Southeast Asia dropped by over 16% in the January to May period of 2024.
Economic growth in the region has not resulted in increased U.S. dairy imports, contradicting typical market expectations.
The stronger U.S. dollar has eroded purchasing power in Southeast Asian countries, making U.S. dairy products less competitive.
The lack of free-trade agreements and high U.S. dairy prices relative to global competitors have also contributed to the decline in exports.

Summary:

U.S. dairy exports to Southeast Asia have fallen significantly in the first five months of 2024, reaching 440.7 million pounds, the lowest volume since 2019. This decline is despite the region’s economic growth, such as Vietnam’s 6.4% GDP spike and the Philippines’ 5.7% GDP gain in Q1. The decline in nonfat dry milk (NDM) and skim milk powder shipments is notable, with USDA figures showing an 8% decrease to 211.2 million pounds in the first five months of 2024 compared to 2023. The fall is partly due to losing market share, as New Zealand has increased its annual shipments to Southeast Asia in 2022 and 2023. A stronger U.S. dollar impacts dairy trade with Southeast Asia by affecting importing countries’ buying power and raising the cost of U.S. dairy goods.