After steadily rising over the past 12 months, the nationwide herd may have peaked as flush ends. Total herd across the 50 states was estimated at 9.51 million head, down about 1,000 head from the May estimate. The 24-state number, representing about 95 percent of the total herd, was reported at just under 9 million animals. Yield per cow was an impressive 66.5 lbs of milk per cow per day, resulting in just under 19.96 billion lbs of milk produced in June. Milk output is up 2.5 percent YOY.

With the spring flush now over and yields likely declining over the next six months, dairy farmers will likely begin to cull less efficient producers from their barns, leading to a contraction in the herd over the rest of the year.

The month of June was impressive, setting several records such as volume of milk produced, yield per cow, and registered stocks of dairy products in cold storage. Stocks of butter stand at 414 million lbs, the largest recorded number in well over two decades.

Traders who bid up dairy prices in Q1 in anticipation of steadily improving reopening demand have turned more bearish following the record production and stocks. International dairy prices followed this bearish sentiment, registering the seventh straight decline in prices on the Fonterra Global Dairy Trade auction platform.

Current prices have fallen 10 percent from their Q1 highs, with core commodity prices for skim milk powder and whole milk powder pressured by significant demand weakness. The COVID-19 Delta variant seemingly leading to a surge in new cases, mostly among the unvaccinated, may be adding bearish uncertainty to expectations. Clearly, the current market is offering a hedging opportunity for buyers to layer in coverage for the back-half of 2021 and into the Q1 2022 ahead of the drop herd numbers.

Total U.S. dairy herd

Source: USDA

Posted by: Information Services
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