Where is the demand side for milk production going? Do we need more milk to fill demand? Demand comes from two areas, U.S. consumption and exports. U.S. consumption comes from per capita consumption of individual dairy products and population growth.
The U.S. government does not control milk production. There are no government assigned quotas. Only the economics of supply and demand manage the milk supply. It behooves a producer to understand where some of these parameters of demand are moving.
Lets first look at milk production over the last 18 years (Chart I). The growth of milk production has been very steady for decades. Chart I has a trend line that follows very closely to the blue line of actual milk production from 2000 to 2017.
Chart I - Annual Milk Production |
Chart II - Percentage Growth in Milk Supply |
Chart III - Population Growth in the U.S. |
Chart IV shows the slowing percentage of population growth. In the year 2000, the population growth was 1.1%. Over the last three years, the population growth has slowed to .7%.
The difference between the current population growth of .7% and the growth in milk production of 1.5% leaves a gap of .8%. To keep inventories in line, the difference between the population growth and milk growth has to be resolved with greater exports and/or greater per capita consumption of dairy products.
Chart IV - Percentage Growth in Population |
March exports and imports will be analyzed in the next post. More insights into the trends of export volume and the breakdown by category will be covered.
Once the data for domestic per capita consumption, export trends, and population growth is analyzed, a summary will be made of how the current trends may impact the bloated inventories and producer pricing.
California will become a Federal Order toward the end of this year, so the final analysis will include California data as a Federal Order paid by the component calculations.
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