Milk Production is Down! Why? Where?

Milk production in the U.S. is down versus the prior year.  This is unusual and is the reason for tight inventories of some dairy products and the current high milk prices.  In January 2022, USA milk production was down 1.63 percent from the prior year (Chart I).  In February the year-to-year loss was lower at just under one percent, but it was still a decrease in milk production.  The decline began in September 2021 and has continued to decline.  Some recent articles have mentioned a lack of heifer availability.  Others have sited high feed costs and limited labor availability.  However, there are other factors involved.  There are geographical shifts, environmental issues, and new processing facilities. 

Chart I - Percent Change in USA Milk Production

In January 2022 the USA decline from the prior year amounted to 315 million pounds, and in February it declined by 170 million pounds (Chart II).

Chart II - Pounds Change in USA Milk Production

The changes by state are varied, with some states increasing production and other states declining.  Table I below shows the gainers ranked by percent and million pounds of increases vs. the prior year.  With new and expanded cheese plants in South Dakota, milk production has grown tremendously. and in Texas, milk production has continued to grow as milk production has moved from New Mexico.

Table I - States with the Largest Gains in Milk Production
by Percent and Pound

South Dakota's growth (Chart III) has been substantial and consistent since 2019.  However, it is still not a major milk producing state.  South Dakota is ranked 17th in terms of total milk production in 2021.

Chart III - Growth of Milk Production in South Dakota

Texas has seen steady growth (Chart IV) since 2019 and is now the fourth largest dairy producing state.  In January 2022 milk production was up by 47 million pounds and in February it was up 52 million pounds.  As shown in the chart below, there has never been a month of milk production lower than the prior year.

Chart IV - Growth of Milk Production in Texas

There have been many states with declines in milk production compared to the prior year as listed in Table II below.  New Mexico had the largest losses in pounds and percent compared to the prior year, and California had the second largest volume losses.  However, the losses in California were a small percent of their overall production.  States like Florida and Arizona (in red) which are very dependent on Class I fluid milk suffer from the declining sales of fluid milk.

Table II - States with the Largest Loses in Milk Production
by Percent and Pounds

Since July 2021, New Mexico milk production has declined (Chart V).  New Mexico has the advantage of several large cheese plants and is unique as having the largest herd sizes of any state.  The large herd sizes have brought economies of scale but have also raised some environmental concerns.  Since June 2021, milk production has started dropping.  In the last six months, the decline vs. the prior year has averaged about 13 percent.

Chart V - Growth and Declines in Milk Production
 in New Mexico

California had January and February 2022 losses of 68 million pounds and 6 million pounds of milk vs. the prior years.  Because California is a major dairy state, the 2022 percentage losses were minor in percentage at 1.6 percent and .3 percent.

Chart VI - Growth and Declines in Milk Production
in California

Michigan was on a roll, steadily increasing milk production until mid 2021.  Michigan milk production has now turned to negative growth.  In 2022, year-to-date losses were 36 and 27 million pounds and averaged three percent annual declines.

Chart VII - Growth and Declines in Milk Production
in Michigan

There are a lot of dynamics going on in the dairy industry.  Certainly, COVID upset the balance, now inflation in feed and labor costs have increased, and environmental concerns are creating uncertainty.  Where milk production is going in volume and geography remains uncertain.  It is interesting that enough milk seems to be available for cheese production, and fluid milk needs must be met.  However, butter churning is behind and butter inventories are low.