Could Declining Milk Production Actually Lead to Better Prices?

Class III milk futures fell substantially from mid-October through November. It was hoped that holiday demand would support the market as demand is seasonally higher. However, underlying cheese prices continued to decline as buyers had already purchased sufficient supplies and demand was not improving as expected. The level of milk production was higher than expected leaving buyers comfortable with no concern over supply. Milk production had been expected to decline due to the impact of bird flu and tight heifer supplies. That was not the case as milk production in August, September, and October was higher than the same months in 2023. Farmers were doing an exceptional job producing milk.

The surprising element throughout this year was the decrease in dairy cattle slaughter. Slaughter was significantly below a year ago throughout the year. In fact, dairy cattle slaughter was below the previous year over the past 15 months. Slaughter for the month of November was the lowest since 2009. This is why the tight heifer supply has not had the impact that had been anticipated.

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