Daily Management Review

Even As NAFTA Brings Other Worries, US Dairy Glut Leads To Problem Of Spilled Milk In Some Markets


Even As NAFTA Brings Other Worries, US Dairy Glut Leads To Problem Of Spilled Milk In Some Markets
Some American farmers have bene forced to spill milk because of a domestic dairy glut in the United States.
The processing capacity for milk is slower that the rate at which the U.S. national milk production is increasing. Due to competition from other beverages and because the share of the nation's total population who are children continues to decline, another challenge facing the industry is total per capita consumption of fluid milk has been steadily falling for some time.
"In Michigan and the Northeast, milk is being dumped," said Gene Paul, legislative coordinator of National Farmers Organization, an Iowa-based organization which markets livestock, grain and milk for its members. "Milk is just being thrown away, because they just don't have the processing capacity."
As more-productive cows allow big dairies to experience output growth, the average production levels are rising and this is also contributing to the dairy glut.
Additionally, worries for American milk producers is being caused by tough trade talk from President Donald Trump and threats to ditch NAFTA, the North American Free Trade Agreement because of the act that Mexico is a huge buyer of U.S. dairy products.
"Exports are a big component now of milk sales in this country," said Peter Fredericks, a dairy specialist with the U.S. Department of Agriculture and administrator in the agency's Northeast milk marketing area.
Indicating that "increases in milk per cow more than offset a slower rate of milk cow expansion", the USDA recently raised its milk production forecast for 2017.
"There are certain supply-and-demand imbalances going on," said USDA's Fredericks. "We're not seeing rivers of milk being dumped. We're not seeing farmers foreclosed on — that type of thing."
While production is going up around 3 percent, the overall U.S. milk consumption is rising between 1 and 2 percent annually on average.
"We're seeing the growth of these very large dairies that have good cows, they have good technology and they just keep producing more and more milk," said Paul. "Production just continues to increase, and there's no brakes on it. And cooperatives are almost encouraging production by paying volume premiums."
According to a report released this month by CoBank American dairy farmers every year are producing about 3 billion more pounds of milk than the year before. It found the available processing capacity, particularly in the Northeastern and upper Midwestern states, "has strained the ability of dairy cooperatives to fill the role of market balancers."
There is less pain being felt by the dairy producers as there is less glut in the Southwestern states.
"It is a regional problem but a serious problem,' said Ben Laine, senior dairy economist at CoBank in Denver. "It has put pressure on pricing, especially in some areas like Michigan. It's depressed prices in other areas whenever you're forced to dump milk because you're not able to process it."
"We're 'nip and tuck' on processing capacity," said Ken Nobis, a dairyman in central Michigan and president of Michigan Milk Producers Association. "Our state's production has grown very rapidly, and it's grown faster than global consumption has increased."
"For 30 or 40 years we've been under the gun of this fat consumption issue," said Nobis. "We're seeing increased consumption of the higher-fat items in dairy, like whole milk, butter and cheese."

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