Expert: Milk production finally drops

WASHINGTON – USDA released their May milk production report and the numbers look good, according to Ken Bailey, dairy marketing and policy expert.

Milk production for 20 select states was down 0.4 percent from the same month a year ago. Cow numbers on dairy farms have fallen two months in a row.

No growth. California, the nation’s number one dairy state, actually had no growth in cow numbers from April to May 2003. And, only five of the top 20 dairy-producing states had positive growth rates for May relative to a year ago.

Good news. This news will be viewed as favorable by the dairy industry, Bailey said. It indicates that the marketplace is finally realigning supply with demand.

The market may have already factored in some of the expectation for lower milk output; the Class III price is expected to peak at $12.50 per hundredweight by the fall.

But it is possible, Bailey said, that dairy futures at the Chicago Mercantile Exchange could get higher, particularly if the market expects the milk production report to indicate a sustained trend toward less milk.

Reasoning. Bailey said it is not known precisely why the nations milk output declined.

As stated earlier, he said one likely reason is that cow numbers have finally responded to months of low milk prices.

The other reason may be related to a cold and damp spring (less milk per cow), Bailey said. This is particularly true for states like Pennsylvania, New York and Vermont.