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Dairy S & D maintaining a balance

A dairy economist says a return of food service demand and strong exports positioned dairy markets well in the second quarter.

Rabo AgriFinance’s Ben Laine tells Brownfield demand strength is needed to support the growing supply.

“We’re in a situation now where we’re still growing that milk production, we’re seeing that milk production growth continue, but we’ve lucked out so far having pretty strong demand to absorb that.”

Laine says the cow herd is the largest in more than 30 years and milk output continues to grow, putting the U.S. in the drivers’ seat for global production growth.

“It does start to weigh down on prices at some point so we’re going to need to rely on continuing to see some of this strong demand in order to help support those prices,” he says.  “And, so far it has to a moderate level, I think we’re relatively balanced.”

Rising feed costs are also tightening margins which Laine says is likely pausing some producer expansion plans, along with high construction costs.  He expects milk production growth rates to slow some into 2022 as a result.