Dairy Processing - July/Aug 2024 - 78

COMMODITIES OUTLOOK
erratic
U
demand
by Nate Donnay | nate.donnay@stonex.com
S dairy supply and demand is highly seasonal. In
the first half of the year we produce more than we
consume and inventories build. Then we rely on those
inventories in the second half of the year as milk production
falls and consumption steps higher for year-end holidays in
November and December.
Since we're just past the midpoint in the year, it's worth
looking at how the markets developed in the first half and
what we might see in the second half of the year.
To sum up the state of the dairy markets in the first half of
2024, it would be fair to say supply growth has remained weak
while demand has been erratic. US milk production for January
through May was down 0.8% from last year after adjusting for
leap year. Some farmers were still working through expensive
feed purchased or produced in the first half of 2023.
In regions where a lot of milk goes into butter, farm gate
milk prices were pretty good, but in regions with a lot of
cheese production, milk prices didn't start to get good until
May. So there wasn't a strong financial incentive to push
production higher until about midyear.
THE SPREAD OF HPAI
The more interesting development for milk production has
been spread of highly pathogenic avian influenza (HPAI) in the
78 JUL-AUG 2024 | DAIRYPROCESSING.COM
dairy herd. There is still a lot that isn't known, but the virus
likely made the jump from wild birds to dairy cows in the
Texas panhandle in October or November of 2023 and started
spreading from there.
As of early July, the USDA confirmed infections on 144
dairy farms; although the true number is likely much higher
than that. When a farm gets infected, it typically sees a 20%
drop in milk production for two to three weeks. A few of the
sick cows don't fully recover and are sent off to slaughter
earlier than planned.
It is estimated that HPAI knocked 0.2%-0.6% off milk
production from March to May. The virus is likely being
spread farm to farm by the movement of calves and cows,
veterinarians, feed and milk trucks, or workers moving
between farms. There is no sign that the spread is slowing
down within the 12 states (mostly in the Central US) it is
already in, and hadn't been detected in a new state since June.
While farmers were still using high priced feed in the first
half of the year, feed costs have been trending sharply lower in
the same time period. With the high price of butter, and now a
relatively strong cheese price, farm gate milk prices are looking
very strong and margins are looking profitable for farmers.
So farmers should be trying to boost milk production, but it is
likely HPAI will keep spreading to new states and will remain a
US dairy prices in the second
half of the year are expected
to be higher than the first half.
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Dairy Processing - July/Aug 2024

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