Dairy Market Signals Distorted

U.S. milk production is at record highs, but these volumes are due to unusual market signals. Milk cow numbers are at their highest since 1993, but the supply of replacement dairy heifers is at its lowest level since 1978. According to a new report from American Farm Bureau Market Intel, strong beef prices and premiums for beef-on-dairy genetics have provided important income through calf sales while reducing the number of dairy-bred heifers going into production. This strategy has encouraged dairy farmers to keep cows in production longer, increasing the milk supply and lowering the milk check. The report questions how milk production can be at these levels before aging cows and a thin pipeline of replacements forces a sharp adjustment.