More Milk, Fewer Replacements

U.S. milk output is reaching record levels, which sounds like a positive if we’re just looking at it from a competitive standpoint. But the reality, according to Danny Munch with the American Farm Bureau Federation, is that what we’re not seeing in that headline is the underlying strain on the dairy herd.

"That output is being propped up by older cows staying in production longer, not by new herd growth. At the same time, the pipeline behind the herd is shrinking. Replacement heifers are at their lowest levels since 1978, and the number expected to calve in the future has fallen sharply. So, while milk supplies are high today, the system supporting that future supply of milk is thinner."

A factor driving these trends? Beef economics. According to Munch, strong beef prices and beef-on-dairy premiums have encouraged farmers to breed more cows to beef genetics and keep milk cows in production longer. That brings short-term revenue gains, but it also reduces the number of dairy-bred heifers available for replacement. The result is higher milk output today, paired with greater risk of sharper adjustments in milk markets down the road.

If you want to dive more into the economics of the issue, read this Market Intel report: https://www.fb.org/market-intel/record-milk-production-shrinking-herd-pipeline