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Economist expects dairy herd expansions

A dairy economist says the decline in the cow herd has been larger than expected with current feed prices over the past 18 months.

Nate Donnay with INTL-FCStone says the recent herd reduction is been the longest sustained contraction in the past 15 years.

“It’s been smaller than what we’ve seen for large contractions in the past, but it’s been longer lived.”     

Donnay says he’s not convinced the contraction is being driven by just low margins but believes farms that would have left in 2015 have hung on longer because of previous record higher prices.

“These delayed exit farms should be mostly out of the system now and we should be reverting back to the normal margin to herd growth relationship.”         

He expects current margins to drive the dairy herd higher by 2-3,000 cows per month over the next six months.  If that doesn’t happen, Donnay says costs other than feed might have changed from previous trends.