In 2016, US milk production grew by 1.9% to a record 93.1bn litres, according to the US Department of Agriculture (USDA). Milk output from US dairy farms really picked up pace in the last four months of 2016 with milk supply growing by an average of 2.3% from September to December.

This momentum in milk supply growth is expected to continue into this year and the USDA has forecast 2017 milk production from US dairy farmers at 95.3bn litres, a 2.3% increase year-on-year. While this may not seem high, it must be remembered that a 2.3% increase on such a sizeable milk pool equates to an additional 2.2bn litres of milk coming from US farms.

The USDA say the increase in production is a result of the improving quality of feed rations available to US farmers. However, the fact that another bumper harvest in the US has left grain prices on the floor has also allowed US dairy farmers to feed higher volumes of grain to cows and drive milk output per cow.

Global dairy markets will be keeping a close eye on US milk output this year, particularly as US dairy companies are sizeable exporters of skimmed milk powder (SMP).

At the same time, the EU Commission is slowly trying to unwind its massive stocks (350,000t) of SMP currently sitting in intervention.

After four tender sales of this intervention SMP, the EU Commission has sold just 40t of product for prices ranging between €2,150/t and €2,200/t. At the last three tender sales, all bids for the SMP stock have been rejected by the Commission as bids were deemed to be too low.

The Irish Farmers Journal has learned that the highest bid received at the last tender sale was €1,850/t, which is well short of the Commission’s value of the SMP currently in storage.

Trade on dairy futures markets in the last week has been broadly positive. Futures prices for whole milk powder (WMP), which are traded in New Zealand, reacted positively to last week’s GDT result. Following a 1% increase in the average price of WMP at last Tuesday’s GDT auction, futures prices have risen over 3% in the last week.

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