Commentary: Surge in February milk production mostly calendar related

by Ron Sterk
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A surprise surge in February milk production of 6% from a year ago at face value appears to contradict forecasts for slowing milk production growth related to high feed prices and lower milk prices. But the anomaly appears to be mostly calendar related.

The U.S. Department of Agriculture in its March 17 Milk Production report, estimated February milk output at 13,919 million lbs. The 6% increase from February 2007 would be the largest monthly year-on-year increase since 8.2% in February 2000. The most recent increase close to the latest jump was 5.9% in February 2005.

Milk production was expected to level off (still increasing from a year ago but at a slower rate each month). Higher feed costs and lower milk and milk product prices since last summer’s peak was supposed to slow the rate of growth in milk production. And that still appears to be the case.

February 2008 had an extra day because of leap year. On a daily basis, February milk production was up 2.4% from a year ago. That increase falls in line with recent monthly changes.

Since the October 2007 increase of 4.1% from a year earlier, increases of 3.9% were recorded for November, 3.1% for December and 2.7% for January 2008. All fell in line with analysts’ predictions of smaller increases.

The large February 2000 increase also was in a leap year. In the 2004 leap year a monthly increase of 1.4% in February actually was a decrease of 2.1% on a daily basis when the extra day was considered.

In its March 19 Livestock, Dairy and Poultry Outlook the U.S.D.A. stuck with its forecast of slower milk production growth in 2008. For the year the U.S.D.A. expects milk production to increase 2.7% from 2007, which compares with growth of 2.1% in 2007. The U.S.D.A. expects milk cow numbers to increase through the third quarter as expansion plans run their course, but to decrease in the final quarter of 2008. The agency forecasts milk production per cow to peak in the second quarter and decrease in the final two because of high feed costs. The forecast year-on-year increase is larger in 2008 than in 2007 because current expansion plans must run their course before turning the corner downward later in the year.

Even if the February milk production increase was an anomaly, it still could add a bit of extra price relief for ingredient buyers who have had little relief for several months.

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