By Drew Frommelt, Special to NEAFA
Milk Production in The Northeast
According to the USDA, milk production in the Northeast states of Pennsylvania, New York, and Vermont experienced modest gains in 2023 when compared to 2022. Year to date through November 2023, milk production increased 1.3 percent in the Northeast from the year prior, while the U.S. saw an increase of 0.26 percent. Milk production increases stagnated across the U.S. in the second half of 2023 due to decreases in the total U.S. herd size, which was down 26,000 cows from 2022. However, 17,000 cows were sadly lost in fire on a dairy farm in Texas, which inflates the 26,000-cow statistic, thus without this single event, the change in U.S. milking cows is minimal. Milk per cow had only a marginal increase in 2023, up 0.12 percent from 2022 or 28 pounds per cow per year in 2023. The decrease in the U.S. herd size could be due to higher beef prices in 2023. The stagnation in the growth for milk per cow is likely due to temperature increases and droughts across the country in the second half of 2023. While total production stagnated in 2023, milk components underwent a notable increase. USDA data shows that as of November 2023 the average butterfat percentage increased .8 percent and the average protein percentage increased .2 percent, these positive trends would be welcomed to continue in 2024.
Milk production in the Northeast is expected to grow at modest levels during 2024. New dairy manufacturing plants are expected to come online in many areas across the U.S., including in the Northeast in the latter half’s of 2024 and 2025. This increase in demand will likely be met with growing milk production if margins allow for it and replacements are available to expand.
Market Conditions and Prices
On-farm profitability and capital investments were down in 2023, per the USDA. Within Federal Milk Marketing Order 1, the average blend price for Suffolk County in 2023 was $20.01 per hundredweight, while the average blend price in 2022 was $24.96 per hundredweight. Class I prices averaged $22.43 per hundredweight in Federal Order 1 during 2023, as compared to an average price of $26.87 per hundredweight in 2022. Per CME Group Data, Feed ration prices were elevated for the first half of 2023. Feed ration prices started trending down in May 2023, but remained above the $10 per hundredweight mark for most of the year. On-farm investments were also likely hindered by increases in interest rates during 2023, in fact, data from the Federal Reserve showed interest rates reaching their highest levels since 2007. Further, USDA data shows milk-feed margins were at their lowest levels since 2012, break-even levels were not met until August.
The economic outlook for 2024 is optimistic. Blend prices are forecasted to be somewhat flat from 2023 in Federal Order 1 for most months in 2024 with an estimated average of $20.41 per hundredweight. Current projections show Class III prices to be lower in the first half of 2024 compared to the second half. Class III prices in the second half of 2024 could rise due to global cheese prices trading at a premium compared to domestic cheese, indicating an opportunity for U.S. cheese manufacturers to increase cheese exports, which could have a positive impact on Class III prices. Feed ration prices are forecasted to hover between $9.10 and $9.60 per hundredweight in 2024. Milk-feed margins are expected to be above break-even levels for all of 2024, this is an indication that dairy farmers could have relatively cheaper production costs in 2024. Finally, interest rates are expected to keep slowly deflating during 2024. These factors could lead to with increases in profitability and more investments in capital projects for farms in the Northeast in 2024.