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Production cutbacks likely for dairy
An ag economist says domestic demand for dairy cannot support recent production expansions which makes strong exports essential this year.
“We have 0.5 percent population growth in the United States and we have close to two percent milk supply growth—it’s going to pressure milk prices.”
Dr. Michael Swanson with Wells Fargo tells Brownfield if the industry can hold onto record exports achieved in 2020, growing supplies will find a home.
“Are we going to see Indonesia, Mexico, China and others step up for powder and cheese exports? If that answer is yes and we don’t have too much competition from the European Union and New Zealand, we can certainly absorb that incremental change.”
He says the trend toward larger dairy farms has left the industry vulnerable to global market swings and when the buyers are not there, production needs to be cut back.
“It’s a very inelastic market and we could see a lot of downward pressure,” he says. “The dairymen put themselves in a tough spot when they produce that much milk all the time.”
USDA’s latest supply and demand report is calling for farmers to reduce their herd sizes in the second and third quarters of 2021 because of expected lower milk prices and increases in feed costs.
