US dairy dynamism: extinguished or revived?

A major dairy power, the United States is currently seeing its production and exports run out of steam. However, the machine should restart in the coming months, judge Idele.

“The US dairy dynamism: extinguished or revived? questioned the Idele on May 31 on the occasion of its day devoted to world milk markets. “Paused in 2022, but probably on the rise from 2023 “, estimates the agro-economist Marion Cassagnou

She looks back on the rupture observed in recent months in the dynamics of dairy growth in the United States, a major production basin. Milk collection has been increasing there for several years and reached 102.6 Mt in 2021.

But this record masks a slowdown in production throughout the second half. A trend that is confirmed at the start of 2022: “US production is down every month compared to 2021 : – 1.7% in January, – 0.9% in February, – 0.4% in March, – 1% in April”.

Falling livestock, insufficient margin, adverse weather

Marion Cassagnou points to several explanations for this drop in fundraising. First, the evolution of the dairy herd: high in the first months of 2021, it then suddenly down to 9.37 million cows, “very far from 2020 levels”. The trend is confirmed in the first months of 2022.

Another reason: the net margin generated does not seem sufficient to encourage breeders to produce. Admittedly, the price of milk increased sharply in 2021 following an incentive policy, “but this increase was later than elsewhere”. And in parallel, food cost is rising since mid-2020, and the prices of fertilizers and energy have exploded.

Breeders may also be “very wary to see how the situation will evolve according to Chinese demand,” says the specialist. It is also possible that the dairies have “asked not to increase production, or warned that they would pay less for milk to avoid an immediate increase in production as long as the market is not ready”.

Adverse weather also explains the drop in US collections. Dairy producing areas, particularly California, are particularly affected by the droughtwhich makes farmers very sensitive to the cost of imported feed.

On the export side of dairy products, a less rosy situation than in 2021

On the manufacturing side, “we can clearly see the weather effect”: the production of powder, precisely produced in areas affected by drought, is in 13% drop in the first quarter of 2022 compared to January-March 2021. “Dry ingredients are down and, conversely, cheeses are up, like every year”.

The US dairy exports were up sharply in 2021 compared to 2020 (+11% in volume, at 13.6 Mt milk equivalent, and +19% in value), marked by the return of Mexico (+26% in value) and from Canada (+19%) and the growing presence of Asia: +27% to China, 15% to Korea.

But the situation is less rosy at the start of 2022: if cheese exports continue to rise, demand for dry products is less. “With an 8% decrease in March 2022 compared to March 2021, it completely picks up on lean powderespecially to Mexico.

Stable production for 2022, then on the rise thereafter

So what are the prospects for 2022 and beyond? The USDA expects US milk production in 2022 to be similar to that of 2021, therefore on a startle on the second semester.

But “not everyone agrees on this, underlines Marion Cassagnou: do breeders have sufficiently interesting economic indicators to increase production? And “the slowdown in Chinese demand will force the United States to find other markets “. All this with logistics disrupted by the Covid.

The USDA forecasts for the United States a return to the dynamics of increase after 2022, with milk production forecast at 104 Mt for 2023. The agro-economist subscribes to this vision, provided that global demand is present. “The dairy dynamic is not happening in New Zealand, nor too much in Europe. If one wants to continue to exportsomeone has to do it and it’s more likely to be the US.

US consumption should remain stable, and the price of milk to producers will increase in 2022, but decrease in 2023.

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