Report for May
Several positive signs have emerged in recent months that are pointing to a tightening milk supply-demand balance and improving milk prices. Year-over-year milk production growth moderated from 2.4 percent in January to 1.8 percent in March, and there are unmistakable signs that the national dairy cow herd is on the ebbing side of the current herd expansion cycle.
U.S. dairy exports are particularly strong, with March exports reaching the second highest level ever as a percentage of monthly U.S. milk solids production. Meanwhile, domestic use of dairy products in the first quarter of 2021 rose 7 percent from a year earlier for both butter and American-type cheese. Still, despite the rosier outlook, immediate conditions remain challenging, with margins under the federal Dairy Margin Coverage program averaging almost $3.00/cwt below the maximum $9.50/cwt coverage level during the quarter, as rising feed costs combined with out-of-balance milk supplies kept returns over feed costs at depressed levels.