USDA Boston Federal Milk Marketing Order Class I Milk Price
Milk Income Loss Contract Program Pyment Rates
Milk Production - National Agricultural Statistics Service (NASS), USDA
Dairy Products Production - National Agricultural Statistics Service (NASS), USDA
Dairy Products Prices - National Agricultural Statistics Service (NASS), USDA
Dairy Products (2008 Annual Summary) - National Agricultural Statistics Service (NASS), USDA
Milk Cows and Production - National Agricultural Statistics Service (NASS), USDA
Dairy Market News Weekly Report - Agricultural Marketing Service (AMS), USDA
Monthly Milk Costs of Production (by U.S. State) - Economic Reserach Service (ERS), USDA
Dairy: World Markets & Trade - Foreign Agricultural Service (FAS)
International Dairy Market News Reports - Foreign Agricultural Service (FAS)
CME Group Daily Dairy Report
Dairy farming in the United States is still a fractured industry with only a handful of national operations and the rest of the industry is dominated by regional and local dairies. However, the total number of dairies in the United States has declined in the past decade with the rise of very large operations in the western United States and the decline of dairies in the southeastern United States. The National Agricultural Statistics Service (NASS), Agricultural Statistics Board, U.S. Department of Agriculture (USDA), indicates that there were 123,700 milk cow operations in the U.S. in 1997 compared to 97,560 in 2001, a decline of 21%. During this same period, milk cow inventory declined from 9.25 million head in 1997 to 9.12 million head in 2001. Despite the decrease in milk cow operations and inventory, milk production increased 6%, from 156,091 million pounds in 1997 to 165,336 million pounds in 2001, as large operations increased their share of production. The milk cow inventory continued to decline to a low point of 9.01 million head in 2004 and has slowly increased to 9.19 million in 2007. However, during that time production per cow has been increasing annually such that total production was 170,348 million pounds in 2003 and continued to increase to 185,654 million pounds in 2007. The USDA projects cow numbers to continue to decline into 2010, falling below 9.0 million by first quarter, which will be offset by continued increase in production per cow.
This has meant a further change in the industry such that milk is shipped greater distances across the country rather than produced by local dairy farms near the processor / distributor. The biggest change in the industry has been the dominance of a single dairy farmers cooperative, the Dairy Farmers of America (DFA), which provides approximately 34% of the nation’s milk supply and also owns bottling operations in the United States. DFA’s primary purpose is marketing the raw (DFA owns a marketing affiliate Dairy Marketing Services), unprocessed milk of its dairy farmers to dairy processors. DFA also invests in dairy processors in order to allow DFA’s farmer members to participate in the profits earned from the sale of the finished dairy-based products, and to secure an outlet for its members’ raw milk.
Most dairy cows in the United States are Holsteins, a breed that tends to produce more milk per cow than other breeds. The composition of Holstein milk in approximate terms is 87.7%, 3.7% milkfat, and 8.6% skim solids.
Historically, feed costs have represented 40% to 60% of the total cost of producing milk thus when feed (alfalfa, corn silage, commercial corn feed) prices increase it directly affects the net income result of the farm operation. Thus when the price increases substantially above the pre-season estimate, cutting feed costs is one of the first inputs that dairy farmers consider. It is very easy to reduce feed costs by eliminating or reducing the amount of supplemental protein or the mineral-vitamin premix, but often times this will result in substantial reductions in the amount of milk produced per cow. Unfortunately, cows are the type of animal that always want food available and within easy reach thus dairy farmers must always overfeed (the amount of left over feed is referred to as "refusal" and refusals from the milking cows are often fed to other livestock on the farm but that is still expensive) thus feed rations need to be analyzed and monitored closely for everything from mixture to moisture content.
Most of the smaller operators in the industry have been slow to switch over to mechanized milking operations due to the substantial capital investment involved and tend to rely upon manual labor. However, like many occupations in the United States, non-Hispanic caucasian and afro-Americans do not apply to work in the industry and most of the manual labor supply consists of immigrants from Mexico and Latin America, both legal and illegal. Dairy operators are concerned that immigration reform and restrictive hiring regulations may affect the reliability of their work force.
Dairy farms and dairy cooperatives sell their raw milk to processors / distributors (held by private or publicly traded companies or cooperatively owned. Some of the larger companies own their own manufacturing plants that produce branded, private label, store branded, licensed, and franchised products / lines of milk, creams, ice cream, cottage cheese and sour cream, and extended shelf-life dairy products. Some processors / distributors supply milk in bulk to insitutions (schools, colleges and universities, corrections facilities, military, hospitals, restaurants). Some processors / distributors own dairies or are affiliated by common ownership. The largest processor in the United States is Dean Foods.
Almost all of the milk produced in the United States meets fluid grade milk standards (Grade A in most States). All fluid milk sold to consumers is first pasteurized (U.S. federal law prohibits the sale of raw, unpasteurized milk across state lines; a number of states do allow licensed farms to sell raw milk within state boundaries). Pasteurization means that the milk is heated to eliminate possible salmonella, campylobachter, listeria and E. coli bacteria. Critics of pasteurization indicate that the process also destroys beneficial bacteria, enzymes, vitamins and amino acids. However, only about one-third of the milk is actually processed into fluid milk and cream products.
Fluid milk processors face a unique supply-demand situation not shared by most other food products. Farm milk production varies by day, week, and season because of weather and feed conditions. Similarly, fluid milk sales vary greatly by day and season because of consumer shopping patterns. Because these patterns cannot be precisely predicted, a system must be maintained to get milk where it is needed when it is needed. Shipping milk among locations and storing it for a day or 2 can solve some of the problem, but a pool of "on call" raw milk is ultimately needed. The portion of this reserve not actually used in fluid milk products is manufactured into other dairy products.
Coordinating supply and demand for the fluid market is called balancing. Individual plants may do the balancing, but it is more efficient for a few entities, or even a single entity, to provide the services for a market. Dairy cooperatives have in most cases taken on this important function.
The remaining milk—almost two-thirds of the milk supply—is used to produce a wide array of manufactured dairy products. Almost half of the milk supply is used to turn out about 9 billion pounds of cheese each year. Mozzarella has recently moved past Cheddar to become the most popular variety. Output of most varieties has grown steadily for many years, as cheese has become a staple in the American diet.
Production of ice cream and other frozen dairy products totals about 1.5 billion gallons, about two-thirds of which is regular ice cream. Frozen dairy products are commonly made by fluid milk processors, although specialized plants are well established.
Butter and nonfat dry milk traditionally were joint products. The cream from milk was churned for butter, and the remaining skim milk was dried for nonfat dry milk. About a tenth of the milk supply is still used this way, although more than half of the butter produced now comes from cream not needed when milk is used for fluid milk products or cheese. Production of these products has been roughly constant for many years, although their relative share of dairy product output has declined.
In October 2009, an antitrust law suit was brought in the U.S. District Court in Burlington, Vt., against the DFA and Dean Foods (Alice H. Allen, et al. vs. Dairy Farmers of America, Inc., Dairy Marketing Services, LLC, Dean Foods Company and HP Hood LLC; Case No. 2:2009cv00230), which is seeking class action status and alleges that the DFA, DMS and Dean Foods cooperated together to monopolizing a level of distribution of fluid milk in the Northeast and forcing dairy farmers to join DFA or DMS. HP Hood (part-owned by DFA) was also named in the suit for aiding DFA’s and Dean’s monopolization and, in the case of DMS for price-fixing with DFA.
Demand for dairy products increased substantially world-wide up until mid-2008 after which the demand and prices began a steady decline. In the United States, the price for whole milk peaked in July 2008 at $3.89 per gallon. The price for powdered milk had peaked a year earlier at $2.20 per pound. The decline in prices is the result of the decline in demand across all product markets due to the global recession of 2008 / 2009. The economic slowdown arrived at a point where the supply of dairy cows had increased to meet milk demand. In the United States the amount of powdered milk in storage has increased substantially during the 4th quarter 2008 and 1st quarter 2009 and the U.S. government has committed to purchasing and storing approximately $90 milllion worth of product in warehouses (approximately 112 million pounds at $0.80 per pound). U.S. dairy farmers are reluctant to cull their herds in the event that demand revives (it is expensive and can take several years to increase herd size), especially in the Asian and Mexcian markets where the growth for U.S. exports has been the most significant. However, during 2009 in the United States, the National Milk Producers Federation completed a cull of approximately 101,000 milk cows in order to reduce capacity.
Dairy operations are more mechanized in Europe compared to the United States however, dairy farms within the European Union have had the same problem of declining prices during 2009.
In the United States, the USDA's Milk Income Loss Contract Program (MILC), administered by the Farm Service Agency (FSA), compensates dairy producers when domestic milk prices fall below a specified level. The Food, Conservation, and Energy Act of 2008 (2008 Farm Bill) reauthorizes the Milk Income Loss Contract (MILC) Program through September 30, 2012. The USDA Farm Service Agency's (FSA) MILC Program supports the dairy industry by providing direct counter-cyclical style payments to milk producers on a monthly basis when the Boston Federal Milk Marketing Order Class I price for fluid milk falls below the benchmark of $16.94 per hundredweight (cwt.). The 2008 Farm Bill changed the $16.94 per cwt of milk trigger for MILC payments to a variable trigger that may be adjusted monthly for variations in feed costs above $7.35 per cwt of a 16-percent protein feed ration. Monthly MILC payment rates will be determined and payments issued to eligible dairy operations when the Boston Class I price falls below the feed-cost-adjusted trigger. USDA Milk Income Loss Contract Program (MILC)
Links to Milk Market Administrator Sites:
Atlanta, GA Milk Market Administrator FO #6 & #7 www.fmmatlanta.com/
Boston, MA Milk Market Administrator FO #1 www.fmmone.com/
Carrollton, TX Milk Market Administrator FO #126 www.dallasma.com/
Cleveland, OH Milk Market Administrator FO #33 www.fmmaclev.com/
Lenexa, KS Milk Market Administrator FO #32 fmmacentral.com/
Louisville, KY Milk Market Administrator FO #5 www.malouisville.com/
Minneapolis, MN Milk Market Administrator FO #30 www.fmma30.com/
Seattle, WA Milk Market Administrator FO #124 & #131 www.fmmaseattle.com/
International dairy trade absorbs only about 5%t of the cow's milk produced globally. The trade is primarily in major manufactured dairy products—butter, cheese, and dry milk powders—with some trade in fluid milk products, ice cream, yogurt, and dry whey products.
The Dairy Export Incentive Program (DEIP) operated by the USDA provides subsidies to U.S. dairy farmers that will allow them to sell certain U.S. dairy products at prices lower than the actual cost of acquiring them, which is permissable under World Trade Organization (WTO) rules. Thus, on an annual basis (the DEIP program year runs on a July to June calendar) U.S. dairy farmers receive export subsidies for specific amounts (measured in metric tons) of cheese, non-fat dry milk and butter fat.
Globally, the DEIP export subsidy program has not been able to demonstrate an ability to permanently expand exports or build U.S. market share in targeted countries. However, the DEIP was successful in offsetting European Union export subsidies for dairy products to Mexico which permitted the U.S to develop and sustain a market for U.S. dairy product exports there. Secondly, the DEIP has demonstrated that it is a more cost-effective way of dealing with surplus dairy products than by purchasing and storing them under the dairy price support program.
Dairy Export Incentive Program (DEIP) - Foreign Agricultural Service (FAS), USDA
There has been a consumer and industry reversal with regard to the usage of rBST / Recombinant Bovine Somatotropin, which is an artifical growth hormone that is injected into dairy cows to induce them to increase milk production. The FDA publicly indicates that rbST, the genetically engineered form of BST, is virtually identical to a cow’s natural somatotropin, a hormone produced in the pituitary gland that stimulates the production of milk. During the initial rbST approval process (rBST was approved in 1993), the FDA concluded that there is no significant difference between milk from treated and untreated cows. For that reason, the FDA also concluded it does not have the authority to require special labeling for milk and dairy products from rbST-treated cows.
Mad Cow Disease can be very dangerous to humans if they eat the infected portion of the cow, usually spinal cord, brain and some nervous tissue. Mad Cow Disease is thought to be the result of providing feed to cattle (which are ruminants or strictly grass eaters) that contains ground up meat byproducts as the protein source in the feed. The feed may contain contaminated meat byproducts, which results in the infection of the the cow with the BSE nervous disorder. The inclusion of beef meat byproducts has been banned in cattle feed by the FDA since 1997, however byproducts from poultry and pigs is still allowed. Feed allowed to living poultry and chicken may contain beef byproducts, thus it is still possible to introduce contaminated beef products to cattle by using a livestock feed that contains the byproducts of poultry and pigs that were originally raised on feed that included beef byproducts.
There is no publicized connection between BSE and dairy products.
Dairy goats for cheese production is a viable business operation in Europe and North America. The most popular dairy goat breeds in the United States are Alpine, LaMancha, Nubian, Saanen, and Toggenburg.
American Cheese Society www.cheesesociety.org/
American Feed Industry Association www.afia.org/
American Guernsey Association www.usguernsey.com/
American Jersey Cattle Association www.usjersey.com/
Animal Agriculture Alliance www.animalagalliance.org/
California Dairy Herd Improvement Association www.cdhia.org/
Dairy Farmers of America www.dfamilk.com/
Dairy Market Update (UK / EU) www.mdcdatum.org.uk/
FARM (Farm Animal Rights Movement) www.farmusa.org/
Farm Sanctuary www.farmsanctuary.org/
Food and Agriculture Organization (United Nations) www.fao.org/
Food Safety and Inspection Service (FSIS), USDA www.fsis.usda.gov/
Foot & Mouth Disease (APHIS / Animal and Plant Health Inspection Service), USDA www.aphis.usda.gov/lpa/issues/fmd/fmd.html
Holstein Association www.holsteinusa.com/
International Dairy Foods Association www.idfa.org/
Library of Export Requirements (Food Safety and Inspection Service, USDA) www.fsis.usda.gov/OFO/export/explib.htm
Country by country listing of acceptabe livestock imports.
Livestock and Grain Market News Portal (USDA) marketnews.usda.gov/portal/lg
Maryland Dairy Industry Association www.mda.state.md.us/mdia/mdia.htm
National Animal Identification system (NAIS) USDA animalid.aphis.usda.gov/nais/
National Dairy Council www.nationaldairycouncil.org/
National Milk Producers Federation (NMPF) www.nmpf.org/
U.S. Dept. of Agriculture (USDA), Economics Research Service - Livestock, Dairy, and Poultry Outlook www.ers.usda.gov/publications/ldp/
U.S. Dept. of Agriculture (USDA), Economics Research Service - Livestock, Dairy, and Poultry Outlook: Tables www.ers.usda.gov/publications/ldp/LDPTables.htm
U.S. Dairy Export Council (USDEC) www.usdec.org/
Western United Dairyman (WUD) www.westernuniteddairymen.com/index.php