Dairy Skim is a new episode series, where HighGround Dairy’s top analysts break down the latest USDA Dairy data release.
Transcription:
00:00 Eric: Hello and Happy Holidays! This is Eric Meyer with HighGround Dairy bringing you the Dairy Skim—an abbreviated podcast to provide you with a quick summary and review of the November 2022 US Milk Production Report. With me today is Lucas Fuess, HighGround Dairy’s Director of Market Intelligence who has been busy pouring through the report to find us some key takeaways to discuss.
Before we get into that… Lucas, what’s one of your favorite Christmas traditions and what are you hoping Santa brings you this year?
00:29 Lucas: Thanks, Eric! I grew up in New York and while living in Chicago, one of my favorite traditions is being able to travel back home and spend time with family and enjoy quality time around the holidays. Also, this year my mom says she is officially done Christmas shopping, so I expect cash for Christmas. I think that will be a pretty great gift from Santa.
00:58 Eric: Oh, I like that! Secretly, I bought myself a fancy new live-streaming camera to use for my son and daughter’s baseball and softball games this upcoming season! I know it sounds ridiculous, but as someone who aspired years ago to be a sports broadcaster, making sure parents and grandparents can watch their kids’ sports highlights when they can’t actually be at the games is as close as I will get to that career! Although, I am hosting this podcast so there is that!
All right, let’s move on to the US milk production report. This is now the fifth consecutive month of year-over-year growth and while not as robust as we may have thought here at HighGround, this is still solid growth in an environment where demand isn’t making any real gains either. What caught your eye as you took a look at the data?
01:43 Lucas: I think, like you said, the fifth consecutive month of growth here. That 1.3% YoY gain is a little bit lower. I think what keeps throwing me off here is continued weakness out of California—down half a percent yet again into November and with a state that accounts for about 20% of US milk, that decline has the power to pull down that total US number a little more than a lot of other US states. In terms of the herd size, though, very slight, subtle growth 1,000 additional cows on top of an upwardly revised October number which was also up 1,000 head. However, the official data puts us at the largest herd size year to date. Previously, May had held that title, so we now have more cows than we saw in May and we are at the largest herd size since August of 2021. Finally, on a yield perspective, up 0.9%—that’s very close to that long-term average of 1% growth here. Overall with these numbers, not a ton of surprises.
02:53 Eric: Looking over the state-by-state data, I noticed that Texas produced 10 million more pounds of milk than Idaho in November, making it the 3rd largest state in the country now in terms of production. I know that isn’t the first time this year that has happened, but still noteworthy given all the growth in the Lone Star State over the years. Also, the Midwest seems to be finding its footing again, what does the regional data tell us?
03:16 Lucas: Texas growth was just really impressive on a month-after-month basis. They were the largest milk production gain on a volume basis versus prior year of any state. Contrast that with the still very stark weakness from New Mexico just right across the border. So, still kind of two different stories coming out of the Southwest.
To your point, looking into the upper midwest—a few months ago, this was one of the areas that still continued to see milk struggle. This Class III-heavy region, I think, it was lower Class III prices versus Class IV prices impacting the ability of farmers to recover and add cows in the Upper Midwest. But, looking at most of those states, whether it’s Wisconsin, Minnesota, or even over into Michigan, South Dakota included, all seeing growth versus prior year and that should mean we get plenty of cheese produced here when we get November data and into the coming months.
04:15 Eric: Lucas, as always, thank you very much for your insights. Seems like no real surprises in today’s report, trajectory on milk production is still in growth mode, dairy commodity prices appear to be grinding lower, and that’s where we see things heading into the New Year.
Thanks again for tuning in to HighGround’s Dairy Skim. We’ll catch you again later this week for Cold Storage on Thursday afternoon!
