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Archive for USDA Milk Production Report

Surging Dairy Dynamics: October 27th Global Dairy Market Update

Monday, October 28th, 2024

Discover the latest dairy market trends. How will increased milk production and shifting cheese prices affect your farm’s profits this season?

Summary:

The latest USDA milk production report introduced unexpected optimism with a modest yet significant rise in national output for September, showing a 0.1% year-over-year increase and an upward revision for August. The national dairy herd remained at 9.328 million head, still 38,000 fewer than the previous year. Interestingly, there was a 0.5% increase in milk yield per cow, and improved component levels enhanced milk value. However, production results varied among key dairy states like California, Texas, and New York, revealing a complex landscape. Notably, California maintained steady output before the full impact of the H5N1 outbreak, highlighting the ongoing challenges dairy industry stakeholders face amidst changing regional dynamics.

Key Takeaways:

  • USDA’s Milk Production report revealed a surprising 0.1% growth in U.S. milk production for September, with an upward revision for August.
  • California’s milk production remained stable pre-H5N1 outbreak, while Texas and Idaho saw significant year-over-year gains of 4.9% and 1.8%, respectively.
  • Diverging regional production trends indicate mixed performance across key dairy states, suggesting varied economic and environmental impacts.
  • Cheese prices at CME declined as milk supplies increased, although cheese demand remained robust, driving down inventories for the seventh consecutive month.
  • Butter inventories are more extensive than last year, aided by high butterfat tests, but volatile butter pricing indicates market oversupply pressures.
  • California’s stricter regulations challenge nonfat dry milk production, yet international demand dynamics are crucial in pricing movements.
  • Global milk production figures show varying trends, with New Zealand experiencing robust growth while Argentina and the Netherlands reported declines.
  • Trade tensions are apparent with China’s ongoing import reductions, impacting global export markets and inventory management.
  • Harvest rates for U.S. corn and soybeans are ahead of historical averages, suggesting good feed availability but potential future market volatility.

When the dairy industry braced for another month of grim numbers, the USDA’s latest Milk Production report delivered an unexpected jolt of optimism. The report revealed that milk production in September had not only increased, but it had done so by a modest yet surprising 0.1%. This unexpected positive shift is like fresh air for dairy farmers and industry players, especially compared to the earlier anticipated decline. It serves as a reminder that even in the face of adversity, resilience can prevail. The report holds considerable significance, implying a potential easing pressure for farmers and challenging stakeholders to rethink strategies amid a market fraught with unpredictability.

Unveiling Resilience: September’s Surprising Dairy Uplift

The USDA Milk Production report unveiled some noteworthy trends, including a slight yet significant 0.1% year-over-year growth in September. A particularly intriguing aspect was the revised figures for August, which transformed a perceived decline into a 0.4% increase. This revision illuminates a more resilient production landscape than initially anticipated and reassures stakeholders of the industry’s ability to adapt and thrive in the face of challenges. 

One of the pivotal findings in the report is the stability of the national dairy herd size, which remained constant at 9.328 million heads compared to the previous month. Although 38 head fewer than during the same period last year, this consistency indicates stability amidst broader market fluctuations. It provides a sense of security and stability to stakeholders in the dairy industry. 

Compounding these insights is the 0.5% increase in milk yield per cow. This improvement is particularly relevant as it highlights ongoing efforts to optimize production efficiency. Additionally, the report emphasizes a rise in milk component levels, enhancing the overall manufacturing value of the milk—a critical factor for processors and producers aiming to maximize their returns. 

Navigating the Regional Tides: Divergent Dairy Dynamics Amidst State Variances

The performance of dairy production across critical states in September painted a mixed picture, revealing varied regional dynamics within the U.S. dairy industry. California, which holds a prominent position in national milk production, demonstrated a steady output compared to the previous year. Yet, this stability came before the full onset of the H5N1 outbreak, a highly contagious avian influenza that could significantly disrupt future figures if it spreads to dairy farms. 

Meanwhile, Wisconsin, renowned for its dairy farms, saw a 0.5% decline yearly, a signal of challenges that could broadly affect the Midwest. In contrast, other leading states exhibited robust growth, with Idaho posting a 1.8% increase. In comparison, Texas and New York showed substantial gains of 4.9% and 1.2%, respectively. 

These regional disparities underline the complexity of the U.S. dairy landscape. While some states grapple with production setbacks, others are thriving and expanding. This variation could stem from different regional challenges and opportunities, such as varying access to resources, impacts of animal health issues, and market demands. As production shifts geographically, dairy industry stakeholders must navigate these evolving dynamics, strategically planning for potential economic and operational impacts.

Cheese Market Shifts: Understanding Price Dynamics and Global Demand

As we gaze toward the cheese market, recent activity on the Chicago Mercantile Exchange (CME) paints a fascinating picture of volatility and market adjustment. Last week, we witnessed a noticeable decline in cheese prices. Cheddar barrels saw the most significant dip, dropping to $1.87 per pound by Friday, marking a 14¢ decrease from the previous week. Meanwhile, Cheddar blocks faced a modest downturn, closing at $1.90 per pound after shedding 2.5¢. 

This decrease, while stark, affects historical pricing behaviors. The block-barrel spread, an essential marker of price disparity, measures the price difference between Cheddar blocks and barrels. Its return to its usual norm of around 3¢ highlights a period of market correction in which the alignment of block and barrel prices returns to a stable continuum. 

Concurrently, cheese production continues to outpace previous years, yet inventories exhibit a downward trend. According to the latest USDA Cold Storage report, total cheese stocks are 1.375 billion pounds, reflecting a 7.3% year-over-year decrease. This contraction underscores a robust export demand pivotal in clearing product inventories. American-style cheeses, in particular, revealed a sharper stock decline, emblematic of their competitive production and export dynamics. 

The robust overseas appetite for cheese bolsters the domestic market stability, offsetting some of the price depressions observed at the CME. As stakeholders navigate these dynamics, understanding the interplay of production, price adjustments, and international demand will be critical for maintaining a forward-looking strategy in the volatile dairy landscape.

Butter Bounce Back: Inventory Swells, Market Dynamics Shift & NDM Faces Turbulence

The butter sector has witnessed a notable increase in inventories as of the end of September, accumulating to 302.995 million pounds. This marked a 13.6% rise compared to the prior year, suggesting a shift in market dynamics. The uptick in butter inventories is attributable to solid butterfat tests that have bolstered production. Recent months have seen manufacturers producing butter at a pace that outstrips their immediate ability to move this product through the market, causing stocks to swell. This inventory build-up has exerted downward pressure on butter prices. However, last week saw some price recovery as spot butter gained traction, closing at $2.695/lb. 

Conversely, the nonfat dry milk (NDM) market has faced production challenges, especially in California, where regulatory restrictions have impacted output. California’s situation is unique due to its stringent environmental and operational regulations, which have curtailed the state’s ability to ramp up NDM production even as milk supplies improve elsewhere. Additionally, the demand landscape for NDM paints a mixed picture. While some buyers reportedly have ample supplies, others grapple with shortages, leading to inconsistent market signals. Mexican buyers remain active, providing some support to demand, yet the overall sentiment remains cautious as traders navigate these complexities.

Global Dairy Volatility: Navigating Trade Dynamics and Market Forces

The international dairy market has exhibited notable volatility, reflecting the complexity of global trade dynamics. Regarding futures, EEX recorded 3,270 tonnes traded last week, with butter prices firming while SMP faced downward pressure. SGX reported a larger volume, with 14,905 tonnes transacted. WMP and SMP saw upticks in their average prices, increasing by 2.5% and 1.8%, respectively, indicating a resurgence in buyer confidence. 

E.U. quotations were mixed. French butter prices dropped significantly, whereas Dutch and German quotations showed resilience. Even with fluctuations, butter’s price remained 55% higher yearly. The French saw an increase in the SMP category, juxtaposed with a decrease in German quotations. 

The GDT Pulse Auction highlighted a modest uplift, with Fonterra’s WMP and SMP showing sequential price increments of 1.0% and 2.0%. This indicates recovery sentiments from previous auctions, suggesting a potential strengthening of demand. 

These trends underscore the diversity of market forces at play. Organizations navigating these waters must remain vigilant, as fluctuating prices and volumes can substantially impact future trading strategies and inventory management.

Global Dairy Production: A Symphony of Surges and Slumps

Recent data from major dairy-producing nations reveals a tapestry of growth and decline, exposing global market dynamics. In September, New Zealand’s milk collections surged by 4.1% year over year, showcasing robust growth in a pivotal export sector. Cumulative collections for 2024 reached 12.93 million tonnes, marking a 1% increase yearly, driven by favorable climatic conditions and advancing practices. 

Meanwhile, the U.K. also experienced a positive trend, with September milk production up 1.4% year-over-year, contributing to an increased cumulative output of 11.65 million tonnes for 2024. Australia’s dairy production paints a similar picture, with a 1.4% year-on-year increase, symbolizing a notable recovery and future solid potential, reinforced by cumulative gains of 3.4% year-to-year. 

Conversely, Argentina’s September production dropped 1.9%, contributing to a 9.5% cumulative downturn for 2024. This reflects more significant agricultural challenges and demands innovative strategies to renew growth. Similarly, the Netherlands’ September production decreased by 2.6%, continuing a trend of decreasing dairy production in 2024. 

Poland, bucking some regional challenges, reported a historical high. September production rose 2.6% yearly, contributing to a cumulative 3.5% increase. Such growth underscores effective expansion strategies within the dairy sector. 

These trends indicate varying production levels across critical players in the global dairy arena, affecting trade balances and inventory levels. New Zealand’s strong output will likely bolster exports, potentially influencing global prices. In contrast, production declines in Argentina and the Netherlands could result in tighter inventories and greater reliance on imports to meet local demand. 

Overall, this growth and decline among leading dairy producers manifest as challenges and opportunities in global trade. Inventory levels reflect the converging forces of local production capabilities and international demand. How these nations navigate their production landscapes will be critical in shaping global dairy market trends.

Trade Tensions: Dissecting the Divergence in Chinese Imports and New Zealand Exports

In recent months, the decline in Chinese dairy imports and the increase in New Zealand exports have painted an intriguing picture for the global dairy trade. For September, Chinese dairy imports fell significantly, with total milk equivalent imports down by 12.8% year over year. This marks the seventh consecutive month of decline, notably with whole milk powder (WMP) imports down by a staggering 45.2% compared to last year. Despite some recovery in infant milk formula (IMF) imports, the weakness in the WMP and skim milk powder (SMP) sectors underscores challenges in Chinese demand. 

Conversely, New Zealand reported a 3.4% increase in milk equivalent exports for September. This uptick came despite a downward revision of August figures, showing a much sharper decline than initially recorded. The robust milk production observed in recent months implies that inventories had a chance to rebuild. While WMP and SMP exports continued to lag due to weak demand from key markets like China and Algeria, other categories like butter, anhydrous milk fat (AMF), and cheese showed stronger performances. 

The ramifications of these disparate trends are significant for the global dairy landscape. With Chinese demand dwindling, surplus inventories could exert downward pressure on global prices, posing a potential challenge to producers reliant on this market. On the other hand, New Zealand’s ability to increase exports suggests a shift in demand from other regions or improved competitiveness in non-Chinese markets. Inventory levels in these exporting countries might further stabilize or even grow, depending on how they navigate these changing trade dynamics. 

The interplay between Chinese import contraction and New Zealand’s export expansion could reshape market equilibrium. Industry stakeholders must closely monitor these shifts and adjust strategies to mitigate risks associated with fluctuating demand and growing inventories. This delicate balance will dictate pricing trends and influence future trade policies in the global dairy trade arena.

The Bottom Line

Wrapping up, the dairy market is a landscape redefined by unexpected turns and looming uncertainties. Despite the uptick in September’s milk production, the market faces ongoing challenges with animal health issues and inconsistent regional outputs. The cheese sector sees price adjustments amidst unwavering demand, a dance between supply and global trade powers. Meanwhile, butter inventories rise, shaking the market dynamics, and NDM struggles under regional constraints. The global stage presents a tumultuous backdrop, with Chinese import declines and New Zealand’s contrasting export rise, reflecting broader economic and geopolitical shifts. This volatile environment underscores the need for industry stakeholders to remain vigilant, adapt strategies, and consider the ripples these changes may cast on future market dynamics. 

What does this uncertainty mean for your business, and how might it influence future dairy strategies? We invite you to share your insights or questions in the comments and help us decipher these evolving trends. Remember to share this article with your network to stir the conversation.

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Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations. 

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Will Increased Profits for Dairy Farmers Lead to Higher Milk Production?

Tuesday, September 24th, 2024

Will more profits for dairy farmers result in more milk production? Explore the key factors shaping the future of milk output and its impact on the industry.

Summary:

The latest USDA Milk Production report reveals a slight increase of 0.1% in August compared to the previous year, suggesting a complex outlook for dairy farmers. While the modest uptick is attributed to improved weather and reduced Highly Pathogenic Avian Influenza (HPAI) impact, the future remains uncertain—notable gains in California, South Dakota, and Texas contrasting with New Mexico’s significant decline. Economic factors, environmental conditions, and disease outbreaks will continue to shape production trends, raising the critical question: will rising profits lead to more milk?

Key Takeaways:

  • A slight increase in milk production was seen in August, but future increases may be limited by new challenges such as disease outbreaks.
  • California, South Dakota, and Texas showed positive growth, while New Mexico experienced a significant decline.
  • The financial outlook for farms is crucial in determining if increased profits will lead to more milk production.
  • Environmental conditions and disease outbreaks, including Highly Pathogenic Avian Influenza (HPAI), significantly shape milk production trends.
  • Continued monitoring of economic, environmental, and health factors is essential for the dairy industry’s future.

At a turning point, the dairy sector must balance on the tightrope of little increase and financial instability. Comparatively, the August USDA Milk Production data showed a slight rise of 0.1% compared to last month. Although this rise seems minor, it begs a critical issue: Will more earnings in dairy farmers’ pocketbooks finally translate into more milk production? But now that HPAI is in California, the increasing momentum might be decreasing here in September; strangely, one of the states leading the way upward in August is slowing down here. As industry analysts, economists, and stakeholders, it is essential that we closely examine these dynamics as we probe the elements influencing the sector. The intricate mosaic formed by weather conditions, disease outbreaks, and dairy farms’ general financial situation will decide if higher profitability can propel a more significant increase in milk output.

Profit Margins and Milk Production: A Dance Through Decades of Change 

Dairy farm profit margins and milk output have long been subjects of considerable research and discussion. Let’s turn back now. Changes in policies, the environment, and the economy since 1997 have affected milk output by producers. Often, there was an apparent increase in output when profit margins skyrocketed during good times for the economy. Driven by a better financial situation, farmers invested in better feed, technologies, and facilities, immediately increasing milk production.

For example, the USDA noted notable increases in milk output during the early 2000s economic boom, which matched more significant profit margins [USDA Data Products]. Likewise, the dairy boom in 2014—characterized by very high milk prices—saw output drop significantly as profits provided the required funding for growth and innovation.

Still, it can be a complex equation. Environmental factors, world demand, and health crises may upset this link. The financial crisis 2008 serves as a sobering reminder of how rapidly fortunes may turn upside down, resulting in an unexpected decline in output and profits even in light of past increases.

Knowing these past developments helps us to see things from a different angle. Although more revenues usually translate into more milk production, unforeseen events might change this direction. Balancing hope and caution and monitoring the many elements influencing this ever-changing sector will be imperative.

Stable Yet Shifting: What Do Current Milk Production Trends Tell Us?

August’s most recent USDA Milk Production report shows a complex terrain for the dairy sector based on present production patterns. Milk output showed slight variation from last year’s level, reflecting stability and a steady increase.

The average cow output in the 24 central states was 2,036 lbs. in August, up 8 lbs. from August 2023. These numbers point to a modest but notable increase in individual cow output.

Regional performance analysis offers further information. Historically, as a powerhouse in dairy output, California saw a 2.0% year-over-year growth. With corresponding rates of 8.5% and 7.8%, South Dakota and Texas also showed outstanding increases. On the other hand, New Mexico had a notable drop—11.3% from the year before.

Though small, these numbers highlight the need to monitor environmental and economic variables impacting milk output. The dairy industry must change and react to these factors in the future to maintain and maybe increase production.

The Unpredictable Dance of Weather and Health: Navigating Dairy’s Volatile Landscape

Examining the August data shows how closely health emergencies like Highly Pathogenic Avian Influenza (HPAI) interact with environmental circumstances. Milder weather probably filled in the output shortfall significantly. Furthermore, the areas with fewer HPAI outbreaks showed higher production numbers, which supports the theory that knowledge of environmental and health issues is essential to comprehending output fluctuations.

Now that HPAI is in California, the increasing momentum might slow in September; paradoxically, one of the states leading the way upward in August, California, was up 2.0% year over year. This shows the often shifting dynamics in the dairy sector, where even states displaying positive development might encounter obstacles preventing continuous output expansion.

HPAI and Beyond: Navigating the Complex Web of Dairy Production Challenges 

Future milk production assessment calls for carefully considering numerous issues and constraints affecting the sector’s direction. One major worry is that highly pathogenic avian influenza (HPAI) invades essential states like California. Given its recent 2.0% year-over-year rise in output, HPAI’s presence in California raises alarming questions. Should HPAI afflict other areas, the accompanying biosecurity policies and limitations may stop the increasing tendency.

Likewise, other states exhibiting notable positive increases might have problems should HPAI or related problems surface. For example, Texas had a 7.8% rise in output, while South Dakota recorded a fantastic 8.5%. These improvements, nevertheless, might be lost should adverse circumstances develop. On the other hand, states like New Mexico recorded a notable drop of 11.3% year over year, suggesting that certain regions are already suffering under current demands.

Environmental conditions, illness outbreaks, and economic changes are essential factors that need careful observation. Dairy players must be alert to these elements to negotiate any downturns and properly seize new prospects.

The Economic Tightrope: Can Financial Health Drive Milk Production? 

Given the nature of the present economy, one cannot stress the financial situation of dairy farms. Rising operating expenses, changing milk prices, and erratic environmental conditions affect a dairy farm’s financial situation and determine its general output. Farmers struggle with these financial difficulties constantly. Hence, wise financial management is essential for survival and expansion.

Will more milk output follow from more excellent money in farmers’ pockets? This question exposes a fundamental industrial disagreement. Increased profitability theoretically provides farmers the means to invest in better technology, premium feed, and improved herd health—qualities that may increase milk supply.

The response may be more complex, however. The supply of heifers—young female cows not yet calved—is a major restricting issue even if the financial situation improves. Without enough heifers to grow herds, even the most financially strong farms might have trouble increasing output. This dynamic calls for a comprehensive perspective wherein interactions among financial stability, herd expansion capacity, and external factors like disease outbreaks and environmental circumstances shape the future of milk production.

Monitoring these economic indicators and their interactions with other production variables is vital for dairy stakeholders. A key component of the dairy sector’s complicated machinery is that farms’ financial situation affects everything from daily operations to long-term strategic planning.

Navigating Future Challenges: Economic Health, Environmental Impact, and Disease Management 

The future requires thoroughly examining several vital factors as milk production trends hover in a fragile equilibrium. The economic conditions will probably be rather significant. Will we find a direct link to higher milk output as farm financials improve? History points to a good trend, but recent unheard-of disturbances have tempered our hope.

One must recognize environmental factors. Weather patterns have become increasingly erratic. Extreme temperatures and drenches may stress animals, directly affecting milk output. Mother Nature still has a powerful influence even with developments in agricultural management and technologies. Recall the 2022 heat wave? It cut output in a few critical states. Still, good circumstances this past summer helped to cause a little increase. Will these patterns hold now?

Still, another wild card is disease outbreaks. Although Highly Pathogenic Avian Influenza (HPAI) has some lessening effect, its re-emergence in California warns us of its continuous menace. Lessons from prior infections underline the need for constant awareness and strong biosecurity policies. Are farms more suited today than ten years ago to control such hazards? Though the sector is still split, some industry insiders would say yes.

The combination of better economic times, mild weather, and efficient disease control will help the dairy business to be positioned for cautious hope. Still, one has to be realistic. The way ahead is anything from simple, even if heifer availability limits things. Navigating these problematic challenges will depend on being informed and agile. What, then, in your opinion, will be the most challenging obstacle for the dairy sector ahead?

The Bottom Line

The dairy sector finds itself at a crossroads, where small changes in milk output suggest probable industrial transformation. The figures for August show how dynamically linked environmental circumstances, disorders like HPAI, and economic issues are. However, continuous difficulties limit this potential. Looking forward, one wonders: Will milk output rise noticeably if dairy farmers discover more money in their pockets? Alternatively, are other factors, including heifer availability and disease outbreaks, that will finally define the limits?

Learn more:

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Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations. 

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Navigating the Waves: Dairy Producers Defy Challenges to Keep Barns Full Amid Soaring Milk Prices and Adverse Conditions

Friday, June 21st, 2024

Learn how dairy producers are managing high milk prices and tough conditions to keep their barns full. Can they keep milk production steady despite these challenges?

Producers are making significant efforts to preserve their herds, often lowering milk yield standards to avoid slaughter. This collective action has led to the lowest dairy cow slaughter rates in eight years, indicating a shared commitment to increase herd sizes and milk output. However, external pressures such as severe weather and avian influenza pose additional challenges to this collective quest. 

With the prospect of tightening milk supplies and reduced production, the dairy industry is entering a crucial period. The coming months will serve as a litmus test for the resilience and ingenuity of dairy producers across the nation. We invite you to delve deeper into the challenges they’ve overcome and the strategies they’re employing to navigate these turbulent times.

A Remarkable Feat: Dairy Producers Innovate to Sustain Herd Sizes Amid Soaring Milk Prices

MonthSpringer Prices (2023)Springer Prices (2022)
January$2,500$2,150
February$2,600$2,200
March$2,700$2,300
April$2,800$2,400
May$3,000$2,500
June$3,100$2,600

Dairy producers have demonstrated remarkable resilience in maintaining herd sizes despite soaring milk prices. They have invested over $3,000 in springers, a testament to their commitment to high-quality replacements. By adjusting milk yield standards, they have managed to retain more cows in the herd, avoiding the financial impact of sending them to the packer despite record-high beef prices. 

MonthCull Rate (2024)Cull Rate (2023)
January4.5%5.2%
February4.3%5.0%
March4.1%4.8%
April3.9%4.6%
May2.8%4.3%
June2.7%4.1%

This strategic move led to a significant drop in dairy cow slaughter rates, with only 216,100 heads culled in May—an eight-year low. The decreased cull rates boosted herd numbers. The USDA’s Milk Production report revised April estimates upwards by 5,000 heads, and May saw an additional expansion by another 5,000 heads. Consequently, the U.S. milk parlors housed 9.35 million cows in May, the highest count in seven months, though still 68,000 head fewer than in May 2023.

USDA’s Revised Estimates Highlight Complexities in Dairy Sector Dynamics 

The USDA’s latest Milk Production report, a comprehensive analysis of milk production, supply, and demand in the United States, brings new insights into the dairy sector. The revised estimate for April shows an increase of 5,000 head in the milk cow herd despite a slight decline from March. The herd grew by another 5,000 in May, totaling 9.35 million cows—the highest count in seven months but still 68,000 fewer than in May 2023. 

MonthMilk Production (Billion Pounds)Year-over-Year Change (%)
December19.75-0.2%
January19.80+0.3%
February17.68-0.9%
March19.60-0.4%
April19.55-0.6%
May19.68-0.9%

Milk output, however, presents a less encouraging picture. April’s production was adjusted to a 0.6% decline, and May followed suit with a 0.9% year-over-year decrease, dropping to 19.68 billion pounds. 

These figures highlight the challenges facing the dairy industry. Even with herd growth, heat waves and avian influenza undermine yields. This could tighten milk supplies and increase prices, emphasizing the need for adaptive strategies in this volatile market.

Heat Waves and Avian Influenza Compound Pressures on Dairy Producers 

Adverse conditions have taken a toll on milk yields, exacerbating dairy producers’ challenges. The heat wave sweeping through California, the Southwest, and parts of the eastern United States has subjected the dairy herd to significant thermal stress. Record-high overnight temperatures in Florida and the Northeast further hampered milk production. Dairy cows, sensitive to heat, generally eat less and produce less milk when temperatures soar, making it difficult for producers to maintain output levels. Similarly, the spread of avian influenza has reduced herd health, necessitated increased biosecurity measures, and decreased milk quality, further adding to the strain on production capabilities.

While Idaho was spared from the intense heat, it faced its own battle with avian influenza, leading to a significant year-over-year drop in milk output. The state’s milk production fell by 0.6% in May, starkly contrasting the 0.3% gain in April. 

These challenges resulted in a nationwide decline in milk yields and total output. National average milk yields fell below prior-year levels, with total milk production dipping to 19.68 billion pounds in May, a 0.9% reduction from the previous year. The USDA revised its estimate for April milk output to show a 0.6% decline, up from the initially reported 0.4% deficit. These factors underscore adverse conditions’ significant impact on dairy production nationwide.

Worsening Conditions Signal Tightening Milk Supplies Ahead 

As we look ahead, the dairy industry’s adaptability will be crucial as milk supplies could significantly tighten due to worsening conditions. The persistent heat wave in key dairy regions and the spread of avian influenza are adding strain to production capabilities. However, the industry’s ability to navigate these adverse conditions and maintain a stable supply chain instills confidence in its resilience. 

MonthNDM Price ($/lb)SMP Price ($/lb)
December 20221.101.12
January 20231.151.14
February 20231.181.17
March 20231.201.19
April 20231.221.21
May 20231.2051.23

This tightening of milk supplies is already impacting milk powder production. As liquid milk availability diminishes, so does the capacity to produce milk powder. This constraint is evident in the market, with CME spot nonfat dry milk(NDM) prices hitting a four-month high at $1.205 per pound. The market recognizes that the looming supply shortage and upward pressure on NDM prices will likely persist. 

The combined effects of climatic challenges and disease outbreaks highlight the precarious state of the dairy supply chain. Producers are preparing for a tough summer, where every pound of milk is crucial for meeting demand and stabilizing market prices. Navigating these tumultuous times will be critical to the industry’s resilience and adaptability.

A Seismic Shift: China’s Domestic Milk Production Transforms Global Dairy Markets

YearMilk Production (billion pounds)
201974
202078
202182
202290
202397

China’s significant increase in domestic milk production over the past five years, adding roughly 23 billion pounds, has had a profound impact on global dairy prices. This surge is equivalent to the combined annual output of Texas and Idaho, underscoring the global reach of the dairy industry and the need for producers to stay informed about international market dynamics. 

Data from last month underscores this trend: whole milk powder (WMP) imports fell by 33% from May 2023, the lowest May figure since 2017. Skim milk powder (SMP) imports plummeted 52% year-over-year, the lightest since 2016. The year-to-date milk powder imports are the slowest in nine years, prompting dairy processors to focus more on cheese production and broaden their market reach. 

While China’s increased milk production hasn’t significantly affected whey imports, local factors like declining birth rates and financial challenges in the hog industry have lessened demand for whey in infant formula and animal feed. As a result, Chinese whey imports dropped by 9.4% last month compared to May 2023. The U.S. provided much of this supply, but the market’s slower growth has led to reduced overall volumes.

Dynamic Domestic Demand for High-Protein Whey and the Ripple Effects in the Dairy Market

Domestic demand for high-protein whey has been pivotal in maintaining dry whey inventories and stabilizing prices. Even with reduced exports to China, the U.S. market’s vital need for nutritional supplements and food ingredients has kept the demand high. This has prevented a surplus, helping prices hold firm. CME spot dry whey remains at 47ȼ, underscoring this consistent support. 

Meanwhile, the intense heat has boosted ice cream sales, tightening cream supplies. This shift has slowed butter churning as more cream goes into ice cream production. Yet, butter demand stays strong, and prices are stable. At the Global Dairy Trade (GDT) auction, CME spot butter prices ended the week at $3.09. These trends show how weather impacts dairy product segments and market behaviors.

Cheese Price Challenges: Navigating Domestic Demand and Global Market Dynamics

MonthCheddar BlocksCheddar Barrels
January$1.95$1.92
February$2.02$1.98
March$2.05$2.00
April$1.98$1.95
May$1.92$1.88
June$1.845$1.92

The recent dip in cheese prices highlights the complexities of market balance. Despite strong domestic demand, securing new export sales has been challenging, with prices close to $2, making U.S. cheese-less competitive globally. This week, CME spot Cheddar blocks dropped 12.5ȼ to $1.845, and barrels fell to $1.92. 

This pricing slump has rippled through the futures market, affecting Class III and IV values. The June Class III contract fell 81ȼ to $19.86 per cwt, while fourth-quarter contracts increased slightly, indicating mixed market sentiments. Class IV futures remained steady, averaging $21.43, showing bullish expectations amid the current market challenges.

Weather Extremes and Market Sentiments: Navigating the Grain Market’s Unpredictable Terrain

MonthCorn Futures ($ per bushel)Soybean Meal Futures ($ per ton)Key Influences
January$4.75$370.00Winter conditions, pre-planting speculation
February$4.65$365.00More favorable weather outlooks
March$4.50$360.00Spring planting preparations
April$4.60$355.00Initial planting progress reports
May$4.40$350.00Heavy rains, mixed planting progress
June$4.35$362.50Flood issues in Midwest, market correction

The grain market faces weather challenges and market reactions this season. A wet spring boosted soil moisture in the Corn Belt, setting the stage for solid crop growth. However, heavy rains west of the Mississippi River have caused oversaturation and flooding fields in Nebraska, Iowa, South Dakota, and Minnesota. This excess moisture, now a concern, hampers fieldwork and threatens crops. 

In contrast, the eastern regions have seen hot and dry conditions. Initially, this was good for crops, but persistent heat is now stressing them, potentially affecting yields if it continues. 

Despite these adverse conditions, grain markets remain surprisingly calm. July corn futures have dipped by 13 cents to $4.35 per bushel, and December contracts hit a four-month low at $4.53. Conversely, July soybean meal prices have risen, reaching $362.50 per ton. This reveals agricultural markets’ intricate and often unpredictable nature, where traders and producers constantly adapt to changing conditions and signals.

The Bottom Line

Dairy producers have shown remarkable resilience as milk prices soar. Despite record-high beef prices, they’ve kept herd sizes steady, investing in springers and reducing cull rates to combat the challenges posed by rising costs. The USDA’s data revision underscores slight expansions in the dairy herd, but producers are under pressure from a heat wave and avian influenza, affecting yields and supply. 

With worsening conditions, milk supplies are tightening, influencing milk powder production and prices. China’s significant boost in domestic milk production has reshaped global markets, making the landscape competitive for dairy exporters. Domestically, demand for high-protein whey remains strong, while cheese prices struggle despite robust demand, revealing a complex market environment. 

Extreme weather and fluctuating grain markets add to the industry’s challenges. Strategic adjustments in herd management, leveraging domestic solid demand for certain products, and adapting to global changes will be crucial. Dairy producers’ ability to innovate and respond to these challenges will determine their success and sustainability.

Key Takeaways:

  • Dairy producers paid $3,000 or more for springers to keep their barns full amidst soaring milk prices.
  • The dairy cow slaughter rate dropped to an eight-year low in May, with just 216,100 head being culled.
  • The USDA reported a 5,000 head increase in the April milk-cow herd estimate and a further 5,000 head rise in May.
  • Despite heightened efforts, national average milk yields dipped below prior-year volumes, with overall milk output dropping by 0.9% year-over-year to 19.68 billion pounds.
  • Heat waves and avian influenza exacerbated the situation, particularly affecting dairy operations in Idaho and many parts of the United States.
  • China’s increased domestic milk production has significantly reduced its reliance on imports, impacting global dairy product prices and competition.
  • Although Chinese whey imports declined, domestic demand for high-protein whey in the U.S. remains strong, keeping prices firm.
  • Ice cream demand due to hot weather has tightened cream supplies and slowed butter churning, keeping butter prices robust while cheese prices faced a decline.
  • Weather conditions have varied widely, with floods in the Corn Belt and heat stress on crops in the east, affecting grain market sentiments.

Summary: 

The dairy sector is facing a surge in milk prices due to increased demand, supply chain disruptions, and consumer preferences. Producers are lowering milk yield standards to preserve herds, leading to the lowest dairy cow slaughter rates in eight years. However, external pressures like severe weather and avian influenza pose additional challenges. The USDA’s Milk Production report shows an increase in the milk cow herd, but milk output is less encouraging. The dairy industry’s adaptability is crucial as milk supplies could tighten due to worsening conditions. The market is also facing a shortage of nonfat dry milk (NDM) and skim milk powder (SMP) imports, with China’s domestic milk production significantly impacting global dairy prices. Domestic demand for high-protein whey is pivotal in maintaining dry whey inventories and stabilizing prices. The grain market faces weather challenges and market reactions, but grain markets remain calm.

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Strange Day in Dairy: Class III Futures Up, Cheese and Grain Markets Down

Thursday, June 20th, 2024

Explore the unusual shifts in dairy markets: Class III futures rise while cheese and grain prices fall. What will the USDA Milk Production report reveal for May?

As the dairy markets reopened after the mid-week break in honor of Juneteenth, a significant cultural event was celebrated annually on June 19 to commemorate the ending of slavery in the United States. Traders and analysts were keenly looking for a clear direction. It was a peculiar day indeed — while the cheese spot market moved lower, Class III futures were higher. Let’s delve into these unusual market movements and unravel the factors.

Understanding the underlying numbers can provide clarity as the dairy markets react to a whirlwind of influences. Below is a snapshot of the current market trends: 

MarketPriceChangeVolume
Class III Futures$18.75/cwt+0.5010,000 contracts
Cheese Blocks$1.8525/lb-0.007513 loads
Cheese Barrels$1.9300/lb-0.01007 loads
Nonfat Dry Milk$1.2075/lb+0.01751 lot
Corn (Dec Futures)$4.5675/bushel-0.075050,000 contracts
Soybeans (Dec Futures)$11.50/bushel-0.125045,000 contracts

Class III Futures Market Sees Surprising Uptick Amid Recent Downward Trends

The Class III futures market saw an interesting uptick despite recent declines. This rebound was a bit surprising. What could be driving this shift?  One possibility is the market catching its breath. After falling prices, minor adjustments and corrections are normal. Traders might see recent lows as too harsh, sparking a buying spree. Expectations of positive news might also play a role, prompting a preemptive move.  Whatever the cause, this uptick adds a new dynamic to an already complex market. Understanding these fluctuations is not just important, it’s crucial to our role as traders and analysts, as it allows us to anticipate and react to market changes.

A Day of Divergence: Cheese Spot Market Buckles Amid Class III Futures Rally

This was an unusual day for the cheese spot market. The cheese sector faced a downward trend despite Class III futures moving higher. ‘Blocks ‘, a type of cheese, dipped to $1.8525 per pound with 13 loads trading. ‘Barrels ‘, another type of cheese, slipped by a penny to $1.9300 per pound with seven lots exchanged.  So, what’s behind this decline? It seems to boil down to supply and demand dynamics and external economic factors. An oversupply of cheese or reduced demand from critical buyers might drive prices down. Economic uncertainties and fluctuations in global dairy trade could also impact the market.

Grain Markets Plunge as Crop Conditions Brighten and Futures Hit Lows Since February

Corn and soybeans saw a significant drop in the grain markets, driven by good crop conditions and ‘technical selling ‘, a strategy where traders sell based on technical indicators rather than fundamental analysis. December futures fell to $4.5675 per bushel, the lowest since February. A positive crop outlook has reassured traders, leading to a wave of selling and pushing prices down.

Nonfat Dry Milk Prices Climb Amid Potential Market Demand Surge and Rising Costs

Nonfat dry milk prices increased to $1.2075 per pound, up $0.0175, with one lot traded. This rise could be due to higher market demand, rising production costs, or shifts in consumer behavior towards dairy products. These elements, along with other factors, will be critical to watch to understand broader dairy market trends.

New Zealand’s Milk Production: A Temporary Decline or a Long-term Trend?

New Zealand’s milk production has declined for the third month. May saw a 4.3% drop year-over-year on a milk solids basis and a 6.2% decrease on a tonnage basis. This might seem concerning, but NZX attributes it to variable weather and pasture conditions.  Despite these drops, the production levels align with the five-year rolling average. So, while the recent declines are notable, they’re part of a long-term pattern with both highs and lows. This decline could have implications for the global dairy market, as New Zealand is a major exporter of dairy products.

The Bottom Line

The dairy markets had an unusual day. While the cheese spot market fell, Class III futures unexpectedly rose, reflecting the inherent unpredictability of the market. Grain markets dropped due to good crop conditions and technical selling, with December futures at their lowest since February. Nonfat dry milk prices rose slightly, hinting at increased demand. New Zealand’s milk production declined for the third consecutive month, sparking questions about future trends. All eyes are now on tomorrow’s USDA Milk Production report for May, a reminder of the constant vigilance required in our field.

Key Takeaways:

  • Cheese spot market prices dropped while Class III futures saw a surprising increase.
  • Grain markets took a significant hit, with December futures for corn and soybeans reaching lows not seen since February.
  • Nonfat dry milk prices witnessed a notable rise, suggesting potential increased market demand or rising production costs.
  • New Zealand’s milk production continued to decline for the third consecutive month due to variable weather and pasture growth conditions.
  • The upcoming USDA Milk Production report for May is a significant watch factor for tomorrow’s market movements.

Summary:

Dairy markets experienced an unusual day, with Class III futures rising unexpectedly and grain markets dropping due to good crop conditions and technical selling. The cheese spot market saw prices drop to $1.8525 per pound and barrels to $1.9300 per pound, driven by supply and demand dynamics and external economic factors. The grain market experienced a significant drop due to good crop conditions and technical selling, with December futures falling to $4.5675 per bushel, the lowest since February. Nonfat dry milk prices increased to $1.2075 per pound, up $0.0175, due to higher market demand, rising production costs, or shifts in consumer behavior towards dairy products. New Zealand’s milk production has declined for the third consecutive month, with a 4.3% drop year-over-year on a milk solids basis and a 6.2% decrease on a tonnage basis. The USDA Milk Production report for May will provide further insights into future trends.

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Is 2024 Shaping Up to Be a Disappointing Year for Dairy Exports and Milk Yields?

Saturday, May 25th, 2024

Are dairy exports and milk production set for another uninspiring year in 2024? Discover the trends and expert insights shaping the industry’s future.

Bart Peer, voeren van vet aan melkvee in Beuningen t.b.v. Misset/Boerderij Opdrachtnummer: 416573 Kostenplaats 06003 Fotograaf: Van Assendelft Fotografie

The dairy industry‘s backbone has been its milk yields and exports, critical for regional economies and farmers’ livelihoods. While demand for high-quality dairy products boosts growth and revenue, the sector faces significant changes. 

The U.S. dairy industry is currently at a crossroads. Year-over-year milk production declined by 1.3% in February 2024. The U.S. milking cowherd has shrunk monthly since June 2023, with limited heifer availability adding to the woes. Despite some resilience in milk component production from December to February, larger challenges overshadow these gains. 

“It’s hard to imagine milk production making material improvements with cow numbers down year-over-year, heifers in short supply, and rough economics in several regions,” says Phil Plourd, president of Ever.Ag Insight. 

With fewer cows, economic stress, and stagnant heifer replacements, 2024 may bring more uninspiring results. Consequently, the dairy sector‘s growth and sustainability metrics could fall short, impacting potential recovery and expansion.

Understanding The Decline: Year-Over-Year Milk Production Trends

Notably, the USDA Milk Production Report highlights a 2% year-over-year decline across 24 central states in April. This pattern aligns with nationwide trends, reflecting more profound systemic challenges in the U.S. dairy sector. Although May 2024 saw a slight increase in per-cow output, total production fell marginally. 

Several key points arise from these reports. The persistent reduction in herd size contrasts with improved per-cow productivity, which fails to offset the decline fully. The milking cow population has dropped to 8.89 million head, a year-over-year reduction of 55,000. 

Regional disparities add complexity. Some areas sustain or boost production slightly, but places like New Mexico saw a drastic 17.3% decline, exposing regional vulnerabilities. 

The economic landscape, marked by falling prices and moderate shipment volume growth, also dampens producers’ recovery prospects. Thus, closely monitoring economic conditions will be crucial for predicting future milk production trends.

YearMilk Production Volume (in billion lbs)Year-Over-Year Change (%)
2020223.2+2.2%
2021225.6+1.1%
2022223.5-0.9%
2023220.0-1.6%

Analyzing Annual Shifts in Dairy Export Patterns

The past year has marked significant changes in dairy export trends, with volume and value experiencing notable fluctuations. Although 2023 saw U.S. dairy exports total $8.11 billion, this represented a 16% decrease from the record year of 2022, highlighting the volatility of global dairy markets. 

One primary factor in these shifts is the decline in domestic milk production, directly impacting export volumes. Despite some milk and milk component production growth from December to February, the overall trend remains challenging. 

Volatile agricultural markets and external factors like El Niño weather patterns have further complicated global supply chains. Additionally, reductions in farmgate milk prices and persistent on-farm inflation continue to strain U.S. dairy farms.

YearTotal Export Value (in billion USD)Percentage Change from Previous YearKey Factors
20206.2+5%Stable milk prices, moderate global demand
20217.0+13%Increased global demand, favorable trade agreements
20229.7+19%High global demand, favorable prices, export market expansion
20238.11-16%Weakened global demand, eased prices
2024 (Forecast)8.5+5%Slow recovery in demand, stable prices

Key Determinants in Milk Production Outcomes

Environmental challenges like droughts and extreme weather events have become significant obstacles to stable milk yields. These conditions can severely affect forage quality and availability, impacting the quantity and quality of milk from dairy cows. For instance, droughts reduce grazing land and drive up feed costs, further straining production budgets. 

Rising production costs have also hindered farmers’ ability to invest in essential technologies. Modern dairy farming requires advanced milking systems, automated feeding mechanisms, and enhanced herd management software. Yet, persistent economic pressures and on-farm inflation make such investments challenging, directly affecting milk yields by reducing farm efficiency. 

Labor shortages continue to impede dairy operations. The industry relies on a consistent and skilled workforce. Still, the COVID-19 pandemic and immigration policy uncertainties have left many farms understaffed. This labor scarcity delays essential operations and hinders the implementation of quality control measures, impacting overall milk production.

Key Influencers on Dairy Export Performance

Trade tensions continue to cloud the outlook for U.S. dairy exports. Tariffs and trade barriers stemming from geopolitical conflicts create uncertainty and hinder competitiveness in global markets. These economic disruptions inflate costs and squeeze profit margins for U.S. dairy farmers. 

Additionally, changing consumer preferences are shifting demand away from traditional dairy products to plant-based alternatives, driven by health and environmental concerns. This trend challenges dairy exporters to develop innovative strategies to recapture market share. 

Moreover, the U.S. dairy industry faces stiff competition from dairy powerhouses like New Zealand and the European Union. These countries are backing their dairy sectors with proactive export strategies and government support, making the global market fiercely competitive. U.S. producers must innovate and improve efficiency to sustain their place in the international market.

Potential Implications for 2024

The anticipated decline in dairy exports could impose significant financial strain on U.S. dairy farmers. With exports representing a crucial revenue stream, any downturn will likely impact their bottom lines and economic stability. This financial pressure may force producers to reassess their operations, potentially leading to further reductions in herd sizes and investments. 

Compounding these challenges, lower milk yields are expected to affect overall supply, which could, in turn, drive up prices. While higher prices might seem beneficial, the reality is more nuanced. Increased prices can lead to reduced consumer demand and heightened competition from global markets, making it harder for U.S. products to remain competitive. 

In light of these hurdles, there is a clear need for government intervention and support to stabilize the industry. Programs such as Dairy Margin Coverage (DMC) have relieved producers, and their continuation will be essential. Additionally, new initiatives could be explored in the upcoming Farm Bill to address the evolving challenges faced by the dairy sector, helping to ensure its long-term viability and sustainability.

Producers’ Perspective: Navigating a Challenging Market

Producers nationwide are acutely aware of today’s challenging market. Many are reevaluating their strategies with dwindling cow numbers and fluctuating feed costs driven by volatile agriculture markets and adverse weather conditions. Persistent declines in farmgate milk prices and high production costs continue to squeeze profit margins, leaving dairy farmers in a precarious position. 

In response, innovative measures are being adopted. Beef-on-dairy operations, merging beef genetics with dairy herds, enhance profitability. Raising fewer heifers and cutting operational costs are becoming standard practices. Automation and technology promise to improve efficiency and cost management. 

However, the pandemic-induced labor shortage remains a critical bottleneck, with health concerns and regulatory constraints limiting workforce availability. Producers are diversifying income streams to mitigate these issues, venturing into agritourism or other agricultural enterprises to buffer against market volatility. 

Looking ahead, producers are closely monitoring market dynamics and profit margins, with any potential rebound in milk production depending on improved economic conditions and informed decision-making. Enhanced sustainability practices are also a focus as farmers strive to reduce methane emissions and implement eco-friendly methods.

Future Forecast: What Lies Ahead for Dairy Exports and Production?

The outlook for dairy exports and milk production is complex and shaped by various factors. Dr. Christopher Wolf of Cornell University emphasized the role of El Nino weather patterns, potentially causing feed cost volatility. Combined with persistent on-farm inflation, these conditions challenge dairy producers facing reduced farmgate milk prices. 

The shrinking dairy herd adds to the difficulties, with a limited supply of heifers restricting milk production growth. USDA reports forecast a slight downward trend for 2024. 

However, high beef prices and decreasing milk production might boost milk prices later in the year, offering market stability. Krysta Harden of the U.S. Dairy Export Council aims for a 20% export target, reflecting ambitions to expand the U.S. presence in global dairy markets despite trade uncertainties. 

In contrast, the EU projects a 1% increase in cheese exports but declines in butter and skim milk powder, presenting market gaps that U.S. exports could fill to boost overall value and volume. 

The future of U.S. dairy exports and milk production hinges on economic conditions, weather patterns, and strategic industry moves, requiring stakeholders to stay informed and adaptable.

The Bottom Line

The dairy industry’s challenges in 2024 are undeniable. The outlook appears grim with a persistent decline in milk production, reduced cowherd sizes, and a heifer shortage. Although U.S. dairy exports showed some promise, achieving long-term goals is still being determined amid fluctuating markets and soft milk prices. 

Industry stakeholders must take proactive measures. It is crucial to explore strategies to enhance production efficiency and improve margins. Expanding export opportunities could capitalize on a potential market resurgence later this year. 

The path to recovery is complex but possible. With informed decision-making and efforts to address current challenges, stabilization, and growth are within reach. Adapting to market trends will be vital in navigating these turbulent times successfully.

Key Takeaways:

  • Year-over-year milk production saw a 1.3% decline in February 2024.
  • The U.S. milking cowherd has been consistently shrinking each month since June 2023.
  • Despite a dip in cow numbers and heifer availability, milk component production showed some growth from December through February compared to the previous year.
  • Phil Plourd, president of Ever.Ag Insight, highlights the difficulty in imagining significant improvements in milk production under current conditions.
  • Economist Dan Basse expects tight cow numbers to persist given the static heifer replacement rates.
  • U.S. dairy exports were strong in February 2024; however, they remain below the record levels achieved in 2022.
  • Dairy Margin Coverage (DMC) indemnity payments provided essential support to producers in 2023 amid declining feed prices and soft milk prices in 2024.

Summary: The dairy industry, which relies on milk yields and exports for regional economies and farmers’ livelihoods, is facing significant challenges in 2024. In February 2024, year-over-year milk production declined by 1.3%, with the U.S. milking cowherd shrinking monthly since June 2023 and limited heifer availability adding to the woes. Despite some resilience in milk component production from December to February, larger challenges overshadow these gains. The USDA Milk Production Report highlights a 2% year-over-year decline across 24 central states in April, reflecting more profound systemic challenges in the U.S. dairy sector. Regional disparities add complexity, with some areas sustaining or boosting production slightly, while places like New Mexico saw a drastic 17.3% decline. Milk production volume has seen significant changes in the past year, with U.S. dairy exports totaling $8.11 billion in 2023, a 16% decrease from the record year of 2022. Environmental challenges like droughts and extreme weather events have become significant obstacles to stable milk yields, impacting forage quality and availability, and straining production budgets. Rising production costs have hindered farmers’ ability to invest in essential technologies, and labor shortages continue to impede dairy operations. Trade tensions and geopolitical conflicts are causing uncertainty and hindering global market competitiveness for U.S. dairy exports. Government intervention and support are needed to stabilize the industry.

Categories : Dairy Markets
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