Normally, late fall is the lowest period of milk output for dairy farmers during the year as cows hit their seasonal yield drop. So, this past week’s USDA milk production report with figures through October came as a bit of a surprise, showing milk output across the top 24 states up 2.5 percent YOY. Adding further to bearish fundamentals, the dairy herd has been slowly recovering since its mid-2019 low.
Total dairy cows rose 14,000 head across the nation, its highest level since August 2018. Likewise, total cows in the 24 largest producing states increased to its highest level ever at 8.88 million. The herd has apparently recovered to a healthy level and is poised to bring on more than adequate supply as we transition into 2021.
In fact, with the pandemic keeping demand muted, the U.S. will likely see a surplus across the dairy complex well into 2021. This is bearish for overall prices and should mean an easier environment for buyers next year—while also creating challenges for farmers.