With improving genetics and management on dairy farms, dairy production and milk prices are changing from year to year. Farm Credit East hosted a session explaining the trends in the dairy industry throughout 2023 – and predicting the trends for 2024.

Dr. Christopher Wolf, a professor of applied economics and management at Cornell University, and Dr. Marin Bozic, the founder of Bozic LLC, shared their thoughts on the success of the dairy industry throughout 2023.

The number of U.S. dairy cows has been floating between 9 million and 9.5 million head for years now. As of November 2023, the U.S. had 9.36 million head, 44,000 fewer than a year prior. One big reason for this drop in dairy cows was the cow slaughter price in 2023. In November 2023 the livestock slaughter value was $104/cwt., which is double what it was five years ago.

There was a lot of incentive to cull cows this past year, but Wolf explained that “there’s less replacement heifers for milk cows, and a big part of that story has been the sexed semen sales.”

In the past five years, the number of domestic dairy semen sales have decreased by around seven million and the beef semen sales have increased by around 6.5 million sales. The incentive has been to use beef semen on the dairy cows who do not need replacements, as there is a large abundance of beef cows in the U.S. compared to dairy.

CattleFax reported there were approximately 2.6 million beef x dairy calves born in 2022, an increase of 2.2 million head over 2018 births of the cross. In 2022, about 7% of all cattle harvested for meat in the U.S. were beef x dairy crosses.

Wolf compared the milk prices throughout the year. “It was kind of a rough year for Class III. We were at $13.77 per hundredweight in July, and it went up to $17 or $18 per hundredweight in the fall, but that’s a pretty low milk price considering the feed cost we had,” he said.

In comparison to the fluctuating milk price, the butterfat content and milk production per cow has been fluctuating throughout the years. Specifically, butterfat content is increasing at a steady rate, but the milk production per cow has been increasing at a slowing rate within the last four years.

When looking at dairy farm profitability from 2000 to 2022, there were eight good years, six average years and nine poor years, according to the presenters. Wolf focused on the rate of return on assets (ROA) without asset depreciation and determined that the good years were at 11% ROA, average years at 6.5% ROA and poor years at 1.4% ROA.

Based on the 2023 dairy industry data, USDA predicted the All-Milk price in 2024 will be $20/cwt. (it was $25.34/cwt. in 2022); Class III will be $16.10/cwt. (it was $21.96/cwt. in 2022); and Class IV at $19.35/cwt. (it was $24.47/cwt. in 2022).

Currently, there is no Dairy Margin Program Coverage operating in 2024, but the USDA plans to have one established soon, “which will be retroactive to the beginning of 2024,” said Wolf.

For more information, visit farmcrediteast.com/en/resources/Events-and-Webinars.

by Kelsi Devolve