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Margin pressures catch up with dairy herd expansions

A dairy analyst says expanding herds and false market support are finally waning after government intervention buoyed producer positions over the past year.

Ben Laine with Rabobank tells Brownfield dairy cow numbers in the past few months have started to slow which he believes is a sign of extended margin pressure.

“A lot of producers came into 2021 with a relatively comfortable position and could withstand some margin pressures from the inflation and higher feed costs, but I think we’re starting to see that show up and impact culling, cow numbers, and a slight decrease in the herd,” he says.

However, in other parts of the world where government aid wasn’t prevalent herd sizes stayed relatively flat and Laine says their milk prices are rising.

“As a result, their prices are relatively high,” he explains.  “In most of the world, milk prices are doing pretty well, still suffering from some inflation and cost and margin pressure but we’re relatively lower in terms of milk price in the U.S.”

Lower U.S. prices have made dairy more competitive on a global market which Laine says has helped keep exports strong and limit margin declines.