Milk Prices Poised for Modest Improvement

US - After a few years of significant challenge, the outlook for US milk producers is beginning to improve, according to a new report from CoBank. Despite projected supply increases, milk prices are poised for modest improvement in the years ahead thanks to new export opportunities and gains in processing and production efficiency.
calendar icon 12 December 2016
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"We're seeing dairy farm expansions, meaning producers are hopeful that prices will increase from today's levels," says Ben Laine, senior economist at CoBank. "These dairies are banking on the future and on global growth. We believe that there is cause for cautious optimism given prospects for strengthened international demand and the industry's long track record of innovation."

US dairies will produce over 225 billion pounds of milk in 2020 – approximately 7 per cent higher than today's output, according to projections from the US Department of Agriculture. And domestic demand for milk and milk products will remain relatively flat, given the maturity of the US consumer market. Nonetheless, Mr Laine says, the industry is poised to benefit from overseas demand in Asia, Latin America and Africa driven by population growth and increased middle class consumption.

Exports now represent about 14 per cent of all US milk production, compared to less than 8 per cent a decade ago. That increases the amount of exposure US dairies have to currency risk, geopolitical events and other unpredictable factors. "The outlook for the next several years is positive, but precarious," Mr Laine says.

One immediate challenge facing the industry is that processing capacity has not kept up with the growth in milk production.

"New processing plants and plant expansions over the next couple of years will provide some relief," says Mr Laine. "Meanwhile, the US dairy industry must do everything it can to maintain and develop domestic demand and evolve with customers. This includes the development of innovative products to adapt to changing consumer tastes."

Going forward the US will need to position itself strategically to be able to compete with other mature dairy producing regions, the European Union in particular. Additionally, the US dairy industry must invest in establishing relationships within sophisticated global supply chains to further develop demand and open new markets, according to the CoBank report.

"Success will hinge on the ability to balance innovation in domestic products with responsiveness and competitiveness abroad," Mr Laine says.

A synopsis of the report, Future of the US Dairy Industry Hinges on Exports is available at The full report is available to media upon request.

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