W12 Dairy Update: Argentine Sector Struggles Amidst Production Decline, US Milk Production Edges Higher Despite Leap Year Impact

Published 2024년 3월 28일

In W12 in the dairy landscape, the Argentine dairy sector faces challenges stemming from a significant decline in milk production amidst adverse weather conditions and infrastructure shortcomings. The recent heatwave led to a notable drop in production, particularly in regions like Córdoba and Santa Fe, prompting concerns about further reductions due to forecasted heavy rainfall. While rising milk prices may partially offset losses, currency disparities and domestic inflation threaten export competitiveness. Meanwhile, dairy production in the US increased overall despite a leap-year adjustment, with California remaining the leading producer and Michigan leading in average milk production per cow.

Argentine Dairy Sector Navigates Production Decline and Export Challenges

Argentina's dairy industry grapples with factors impacting milk production and exports. Feb-24 witnessed a significant decline in milk production, with a 12% month-on-month (MoM) drop compared to Jan-24 and a steeper 17% decrease year-on-year (YoY). This represents the largest YoY decrease in milk production observed in the past 40 years.

The decline is primarily attributed to the recent heatwave, which adversely affected cow health and productivity, particularly in establishments lacking proper infrastructure, such as sheds or shade for animal protection. The dairy basins of Córdoba and Santa Fe were the most impacted regions. The Argentine Dairy Chain Observatory (OCLA) anticipates a similar decline in Mar-24 due to heavy rainfall, potentially leading to a 3 to 5% reduction in fluid milk production for the entire year. This production shortfall is expected to drive further increases in milk prices, a trend observed in recent months. However, higher prices may not fully compensate for the overall decline in production at individual dairy farms.

Argentina's historical reliance on dairy exports (approximately 25% of production) is facing competitiveness concerns due to the slow appreciation of the Argentine Peso (ARS) against the United States Dollar (USD). This currency disparity erodes export profitability, particularly in the face of domestic inflation that has accelerated since Dec-23. Despite the payment capacity constraints the dairy industry faces, a supply shortage could lead to higher-than-expected producer payments, mirroring past trends observed in other product categories.

US Dairy Production Up Despite Leap Year Adjustment

A recent report from the United States Department of Agriculture's (USDA) National Agricultural Statistics Service (NASS) revealed a mixed view of the US dairy industry in Feb-24. Overall milk production in the 24 major dairy states increased by 2.4% YoY in Feb-24, reaching 17.4 billion pounds (lbs). Including all states, total US milk production reached 18.1 billion lbs in Feb-24. However, accounting for the additional day in Feb-24 due to the leap year, milk production decreased by 1% compared to Feb-23.

Despite a decrease in cow numbers, average milk production per cow in the 24 major states rose by 58 lbs YoY to 1,955 lbs in Feb-24. The number of milk cows in the US declined by 89 thousand heads YoY in Feb-24, reaching 9.33 million heads. However, this figure represents a slight increase of 10 thousand heads compared to Jan-24. California maintained its position as the leading milk producer in Feb-24, followed by Wisconsin, Texas, Idaho, and New York. Michigan retained its top spot for the highest average milk production per cow at 2.32 thousand lbs in Feb-24.