Adverse Weather Conditions, Plant Staffing Shortages and Declining Cow Numbers Undermining the US Dairy Market.

Stormy conditions that swept through most parts of the US Midwest days coming up to the end of January brought out snow and blizzards inflicting a significant amount of stress on cows. The stress on cows is expected to subdue milk production – farms in that part of the country are thus already recording lower milk collection numbers. Also, dairy farms and processing plants straddling the east and western sections of the USA according to a USDA report are experiencing labour shortages. What this means is, the difficulty to man processing plants leading to shrinking production timetables and production below optimum capacity.

Supporting the sentiment on US dairy is transportation challenges – reports of driver absence in the West is making it very difficult for easy movement of milk from farms to processors. Even more troubling is the case of untaken supplies of condensed skim in the Midwest which is incapable of reaching areas in the West where there is buying interest. The effects of the logistical and labour shortages have moved across cheese, cream and butter markets in the West and Midwest regions.

Another key driver posing market difficulty is declining cow numbers. Total US milk cow numbers as of January 2022, decreased 1% from the previous year’s number of 9.38 million according to the USDA data. This is a furtherance of the trend of declining cow numbers being experienced in recent months - milk production per cow nonetheless remains stagnant.

The US entered the new year with a bit of tight milk supplies as milk collections in the last quarter of last year, October to December 2021 came up to 55 and a half billion pounds, down 0.1% QoQ. Although market dynamics give confirmation of a shaky start, improvement in weather conditions, and a commitment to increasing farmer yields could offset some of the upside risk in the dairy commodity market. The US All-Milk price paid to farmers rose by $3.50 YoY to $21.80 in December 2021, this gives some hope farmers may drive yields going forward.