Farm Credit East (FCE) hosted a webinar on Aug. 1 to summarize data from the 2023 Northeast Dairy Farm Summary and to provide a mid-year check in.

FCE worked with 283 volunteering dairy farms (143 from Pennsylvania alone) in the Northeast to determine how profitable the dairy industry was in 2023. Chris Laughton, FCE director of knowledge exchange, believes this report to be “one of the most complete financial analyses of Northeast dairy that’s available.”

It’s important to keep in mind that the data collected are an average of the sample of farms that opted to participate in the study and not an accurate representation of all the region’s dairy farms, explained Laughton.

Laughton explained that overall, “the bottom line for 2023 was that input costs remained elevated where milk cost declined.” Specifically, the average milk price in 2023 was $22.76/cwt. – almost $4 below 2022’s average.

The earnings per cow were compared from 2000 to 2023, and Laughton pointed out, “Every so often we get an average losing year,” with 2009 dropping into the negatives.

There has been an “increase in capital requirement to be in the dairy business recently.” Although the average total liability per cow is increasing, the average farm net worth is still strong at over 65%.

The average cash flow per cow, which includes debt principal payments, is what the farm would need to receive to break even on a cash basis. In 2022, the average cash flow per cow was $6.43, whereas in 2023 it was $23.16 – higher than the milk price received, resulting in a negative cash margin. When looking at the average cash flow per hundredweight, “we haven’t seen food profit margins on a consistent basis since 2014,” Laughton said.

The net cost of production per cwt. is “one of the things that farmers and policymakers … look at quite closely, because it shows what it costs to produce milk” in the Northeast. The net cost of production adds up the cash expenses, depreciation and family living expenses and removes any non-milk farm income such as maple sugaring, equipment rentals and crop sales. Despite the sharp decrease in milk prices, the net cost of production was lower in 2023 than 2022, but still higher than 2019 – 2021.

The 2023 Northeast Dairy Farm Summary also reported that feed costs tend to be lower in Pennsylvania, but crop inputs are higher. In terms of net profit per cow, the lowest 25% of farms lost $333 per cow, whereas the top 25% earned $991. When comparing farm profitability to three categories of farm sizes (299 cows and fewer, 300 – 699 cows and more than 700 cows), “the 300 to 700 cows were not in the middle in terms of profit and net cost of production – they were the lowest” Laughton said, because they have “big farm costs and challenges and small farm resources.”

As we head into the last few months of 2024, specialists are analyzing data from the dairy industry to see how it has changed since 2023. Corey Geiger, the lead economist in the CoBank Dairy Knowledge Exchange Division, believes that overall the U.S. has “been growing as a dairy industry.”

In the past 25 years, “we’ve only grown 2.6% when you look at dairy cow numbers” – but when looking at milk production, “we’ve grown a remarkable 44%.”

China is currently the planet’s largest dairy product importer, purchasing 20% of the world’s dairy products. 2020 to 2022 were all record years for U.S. dairy exporting, with Mexico being our biggest customer.

Since 2011, the U.S. milk supply has grown 15.4% (with a decrease from 2023 to 2024), but butterfat production has grown 27.9%. It’s important for dairy farmers to prioritize components in their milk, as that’s an important part of their milk check.

In fact, when looking at butterfat percentages in America from 1924 to 2023, “we are coming on three years that butterfat is setting records,” Geiger said. In the Northeast alone, “we’re sending more and more butterfat to our processing plants each and every year.”

Although U.S. butterfat production is setting records, we still are in a deficit and imported 12 times as much in 2023 as we did in 2011.

Domestic dairy consumption is the highest it’s been since 1960 – 21% higher since 1975. Currently, “dairy is the largest category in the grocery store… and it’s growing,” Geiger said.

Every two decades, the U.S. per capita cheese consumption grows by 10 lbs., with 2024 data pushing past 40 lbs.

Geiger expects that as a country, we will consume at least 50 lbs. per capita before 2040. Snacking cheese itself is projected to be a $75 billion category in the world, with a compounding annual growth rate of 6.5% through 2034.

Whole milk is up 11% since 2010; fluid milk consumption is down 26.5% since 2010; and butter sales are almost as high as they were in 1995.

Beef semen sales in the U.S. have grown dramatically from 2017 to 2023, as there have been a lot more beef on dairy operations. Dairy farmers have been using beef semen because of the premiums for beef calves. Out of the 9.4 million beef semen unit sales in 2023, 7.9 million were sales to dairy farmers alone.

The number of dairy replacements is the lowest it’s been in 20 years, with 500 lbs. or larger down 709,100 head in the past six years. With the limited amount of dairy replacements, culling has decreased tremendously. The total cattle inventory is the lowest it’s been since 1951, and the beef cattle inventory is the lowest since 1961. Considering the U.S. population has grown 126% since 1951, and more consumers are craving beef, Geiger expects the beef on dairy approach to continue.

For more information on the 2023 Northeast Dairy Farm Summary and the 2024 Milk Price Outlook, visit farmcrediteast.com.

by Kelsi Devolve