Meeting the $7 Billion Processing Gap: Can U.S. Dairy Producers Keep Up with Industry Growth?
Source: The DairyNews
Michael Dykes, CEO of the International Dairy Foods Association (IDFA), recently conveyed a positive outlook for the dairy industry at the 2024 International Dairy Forum in Phoenix, AZ. According to Dykes, a McKinsey survey revealed that 60% of processing executives are optimistic about 2024, with 73% planning increased investments over the next three to five years, totaling over $7 billion in planned processing investments.
The central question arises: Can U.S. dairy producers meet the growing milk production demand? Dykes asserted that U.S. dairy producers, known for their efficiency, can produce twice as much milk today with half as many cows as 60 years ago. He expressed confidence that American producers would rise to meet the upcoming processing needs.
However, Rick Naerebout, CEO of Idaho Dairymen’s Association Inc., offered a more cautious perspective, pointing out various challenges faced by producers, including the cost of money. Producers are restructuring debt for the first time in almost two decades, and the cost of obtaining loans has doubled.
Phil Plourd, president of Ever.Ag Insights, emphasized that generating extra milk supply won't be as automatic as in the past. He highlighted the changing dynamics, mentioning the higher costs in the market for surplus heifers and fresh cows, driven by the lowest heifer inventory in decades.
The beef-on-dairy trend, while bringing revenue, doesn't offer an immediate turnaround for milk production growth. Plourd noted that producers may need to adjust their strategies in this evolving landscape.
Jake Bettencourt, manager of TLAY Dairy Video Sales, highlighted the changing dynamics of heifer replacement costs, indicating that the days of low heifer costs might be over for the time being.
Evan Grong, sales manager for Valley Queen, discussed regional variations in growth expectations, with the anticipation of slower growth in South Dakota's I-29 corridor in 2024. However, expansion projects are expected to add approximately 25,000 additional cows in 2025 and 2026.
Despite these considerations, the January 2024 USDA Milk Production Report indicated a slight decrease in the number of milk cows on farms but also a marginal increase in milk production in the 24 major states, showcasing the dynamic and evolving nature of the industry.
However, Rick Naerebout, CEO of Idaho Dairymen’s Association Inc., offered a more cautious perspective, pointing out various challenges faced by producers, including the cost of money. Producers are restructuring debt for the first time in almost two decades, and the cost of obtaining loans has doubled.
Phil Plourd, president of Ever.Ag Insights, emphasized that generating extra milk supply won't be as automatic as in the past. He highlighted the changing dynamics, mentioning the higher costs in the market for surplus heifers and fresh cows, driven by the lowest heifer inventory in decades.
The beef-on-dairy trend, while bringing revenue, doesn't offer an immediate turnaround for milk production growth. Plourd noted that producers may need to adjust their strategies in this evolving landscape.
Jake Bettencourt, manager of TLAY Dairy Video Sales, highlighted the changing dynamics of heifer replacement costs, indicating that the days of low heifer costs might be over for the time being.
Evan Grong, sales manager for Valley Queen, discussed regional variations in growth expectations, with the anticipation of slower growth in South Dakota's I-29 corridor in 2024. However, expansion projects are expected to add approximately 25,000 additional cows in 2025 and 2026.
Despite these considerations, the January 2024 USDA Milk Production Report indicated a slight decrease in the number of milk cows on farms but also a marginal increase in milk production in the 24 major states, showcasing the dynamic and evolving nature of the industry.
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