Pressure Is On Dairy Supply

The dairy supply situation is tight, as put by Mike North, principal at

The domestic issue that will be long supportive of the dairy market is milk production. The U.S. is down about 100,000 cows from a year ago, and milk supply is shrinking. Herd sizes are slowly edging higher with milk prices looking as good as they are – May Class III milk trading at 24.68 as of 11:30 a.m. on Thursday, April 7.

Out West, herd sizes are harder to grow with environmental regulation squeezes and severe drought. North underlines the severity of what’s happening out West in terms of water availability. In Wisconsin, we dig a well about 300 feet to find water. In California, you have to go down roughly 3,000 feet to find water. With wells sold by the foot, that price can add up to several figures, North explains. He adds California is starting its dry season with a fraction of the water they normally have in the reservoir.

This impacts Wisconsin directly. Milk moves where it’s needed, which may be out West this year. The California crisis is price supportive for Wisconsin dairymen and women.

This isn’t just the story in the U.S. Global milk production is declining in top dairy-producing regions such as New Zealand and Europe due to weather and environmental regulation.

North says butter and cheese stocks are looking good. Cheese stocks are sitting at record levels. Butter stocks are not at record levels but are not too far out of line with historic data. The question North faces is: will we build enough butter stocks this spring to satisfy demand at the end of the year? The answer will be dictated by consumer demand.