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Four straight months of rising milk prices and three straight months of falling feed costs have brought some financial relief to U.S. dairy producers from the tough conditions of early last summer. The average all-milk price moved from $14.50 per hundredweight last May to $17.30 in September, while the monthly Margin Protection Program (MPP) margin formula rose from $5.75 per hundredweight last June to $9.48 in September. The world dairy market and U.S. dairy export outlook also continue to brighten, but rising U.S. milk production is complicating the forecast for the coming year.

Commercial Use of Dairy Products

During June–August, sales of fluid milk products were 1 percent below the same period a year earlier. Domestic commercial use of butter and nonfat dry milk were lower following several months of growth. The growth rate of other than American-type cheese, as well as the use of milk in all dairy products, slowed from earlier in the year. Use of American-type cheese, however, increased by 4.2 percent, a significantly higher growth rate than earlier in 2016.

U.S. Dairy Trade

U.S. cheese exports were just 2 percent below a year earlier during July–September after falling by more than 20 percent earlier in 2016.

Rates of decline for butter and American-type cheese exports, including Cheddar, have also slowed in recent months, but were still more than 20 percent for the period compared to a year earlier. Rates of export growth for nonfat dry milk /skim milk powder were strong after declines earlier in 2016. The United States exported the equivalent of 15.1 percent of its milk solids during July–September, compared to 13.9 percent a year earlier.

Butter imports were fewer than a year earlier during July–September for the first time in several years. However, milk protein concentrate imports rose by more than a third after being down for most of the year. Casein imports continue to drop by double-digit percentages, as they have all year. But the percent of total U.S. production represented by imports was up slightly, at 3.8 percent, compared with 3.6 percent a year earlier.

Milk Production

U.S.milk production was 1.7 percent higher than a year earlier during July-September.Monthly growth—1.5 percent in July, 1.7 percent in August and 2.1 percent in September—indicates that U.S.milk production is expanding after an extended period of very slow growth. However,this is less the result of individual states accelerating their production than it is a gradual recovery from extended losses by several states with large production volumes. Extended losses in those states had held down growth in the country as a whole.In September, 15 of the 23 states for which USDA reports monthly milk production saw increases compared to September 2015. Most of this increase,which totaled 394 million pounds, came from just five states: Idaho,Michigan, New York, Texas and Wisconsin. Together, these states produced 284 million pounds more milk than a year ago. Eight of the 23 monthly reporting states lost production from a year ago, but by just 28 million pounds in all.The net increase in production from these 23 states was 366 million pounds,while nationally production was up by 350 million pounds. The difference was a net loss of 16 million pounds among the 27 states for which milk production is reported only quarterly. During the July–September quarter, only four of these 27 states had higher production than a year earlier. And in only one, Nebraska, was the increase significant.

Read the full report.

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