US Milk Production Growth Rate Expected to Decelerate in 2023 and 2024 Amidst Declining Milk Cow Numbers and Price Fluctuations

US Milk Production Expected to Slow Due to Decreasing Milk Cow Numbers

The United States Department of Agriculture (USDA) expects United States (US) milk production to reach 227.1 billion pounds (lbs) by the end of 2023, 500 million lbs lower than the Oct-23 projection but 0.26% higher than the 226.46 billion lbs produced in 2022. In the first three quarters of 2023, US milk production registered a marginal increase of 0.25% compared to the same period in 2022, totaling 170.99 billion lbs. H1-2023 witnessed a slight uptick of 0.68% in relation to H1-2022, reaching 114.91 billion lbs. However, Q3-23 saw a 3.39% decrease over Q2-23 and a marginal 0.07% decline compared to the same period in 2022. In Oct-23, US milk production was 18.7 billion lbs, a 2.63% month-on-month (MoM) increase but a 0.5% drop compared to Oct-22. This data suggests a slowdown in US milk production, primarily attributed to reducing milk cow numbers and declining milk production per cow.

Source: USDA; Tridge

According to the USDA, the number of milk cows in the US stood at 9.38 million heads in Q3-23, a 0.42% decrease from Q2-23 and a 0.32% decline from Q3-22. As of Oct-23, there were 9.37 million milk cows on US farms, a 6 thousand head reduction from Sep-23 and a 42 thousand head decrease from Oct-22. Notably, the number of US milk cows has fallen by 0.43% since the beginning of 2023, starting at 9.41 million heads in Jan-23, with a gradual increase in the first three months followed by consistent declines.

Additionally, the USDA notes that milk production per cow in the US reached 5.98 thousand lbs in Q3-23, down by 3.08% from Q2-23 and a slight 0.33% decrease compared to the same period in 2022. The average milk production per cow was 1,997 lbs in Oct-23, a 53-lb increase from Sep-23 but remaining 1 lb below the Oct-22 value.

Source: USDA; Tridge

The decline in milk cow numbers in the US is linked to heightened cull rates and diminished profit margins in the dairy industry. According to the USDA's Sep-23 report, dairy cow slaughter reached 1.86 million heads from Jan-23 to Jul-23, an increase of 6.29% compared to the same period in 2022. This notable growth in dairy cow slaughter is attributed to favorable beef prices, which prompted farmers to cull their dairy cows. Concurrently, the US dairy sector faces challenges with low profit margins, prompting certain farmers to downsize or exit the industry, contributing to a reduction of over 30 thousand cows since the beginning of the year.

US Farm Gate Milk Price Trend

The average farm gate price for all milk in the US reached USD 21 per hundredweight (cwt) in Sep-23, the highest value since Mar-23. Although this indicated a 6.6% MoM increase, it remained USD 3.10/cwt lower than the Sep-22 value of USD 24.10/cwt. The USDA's Oct-23 report highlighted that across the 24 major dairy states, all milk prices in Sep-23 surpassed those of Aug-23, with notable increases of USD 1.90/cwt to USD 2/cwt in Georgia, Florida, and Virginia.

Source: CLAL.it; Tridge

A continued decline is foreseen in both US milk cows and milk production per cow in Q4-23 and into 2024. Although a slight increase in milk production is anticipated in Q4-23 compared to Q3-23, the overall growth rate for 2023 is projected to slow down but remain above the levels observed in 2022. The outlook for 2024 signals a further deceleration in milk production due to the expected reduction in cow milk herds. US farm gate milk prices are anticipated to continue trending upward in the coming months, influenced by the approaching Christmas season.