The dairy industry seems to be sitting at something of a crossroads.
And the proof is in the puddi….er, yogurt.
Let’s talk supply: Total milk output is growing and it’s not showing signs of stopping. USDA data is pointing to 2.4% growth in daily milk output over 2020, thanks to 82,000 more milking cows all producing 1.5% more milk. The growth is even pushing the U.S. cow herd to a size it hasn’t seen in more than 30 years.
Supply is so strong that areas like Texas have more milk than processing capacity. The state’s 1.32 billion pounds of milk had it flying by New York to become the nation’s fourth-largest milk producer.
Nice timing: Demand is also surging to pre-pandemic levels. Increased traffic at foodservice, re-opened schools, and elsewhere have kept dairy farms busy. Plus, you know what else doesn’t hurt? The estimated $500 million boost in dairy exports that the USDA predicts for 2021 over 2020 levels.
But don’t forget… even while Commodity Corner has been pretty red as of late, commodity prices are still relatively red hot. Feed costs for dairy farmers continue to be a big burden of a bill. Economists expect the high costs to last well into 2022.
Where this goes: With all signs pointing to no slow in supply, the pressure will be on the demand side of the equation to find a home for all that extra milk.