Is There Enough Milk Being Produced to Meet Demand?

Is there enough milk being produced to meet demand?  NO!  In the prior two posts, the growth of cheese production and the decline of butter production were covered.  Cheese production is in great shape, with expansion of nearly three percent annually with wholesale inventories at sufficient levels to meet demand.  Butter production is not in good shape, with declines in production and inventories.  This post will cover the milk supply.  The. milk supply is not growing and in fact declined in the first half of 2022.  This post will provide details on where and how milk production is changing.  Where milk is produced is not necessarily where it is used.  As an example, milk produced in one state may be used to produce cheese in another state.

Chart I shows production of milk in the U.S.  In 2019 to mid 2021, milk production was growing.  It fell to a decrease versus the prior year in September of 2021 and continued decreasing until July 2022.

Chart I - U.S. Milk Production
Percent Change from Prior Year

Table I lists the gains and losses in milk production by the nine largest milk producing states.  In total, in the first seven months of 2022, milk production was down by .64 percent.  The largest losses in both pounds and percent were in New Mexico. Texas had the largest gains in milk production. None of the states that had gains are known for their butter production.

Table I - Increases and Decreases in Milk Production
in the Nine Largest Milk Producing States.

Texas was the only state that maintained consistent growth throughout 2019 to the present (Chart II).  However, the Texas growth in 2022 was less than the strong growth months in 2019 to mid 2021.  

The milk growth in Texas is being used in the cheese plants in New Mexico and Texas.

Chart II - Texas Milk Production

Percent Change from Prior Year

Milk production in New Mexico is declining due to environmental and financial problems (Chart III).

Chart III - New Mexico Milk Production
Percent Change from Prior Year

The Southwest Federal Order is comprised of Texas and New Mexico. The loss of milk production in New Mexico (Chart III) is offset by the increase in Texas.  Milk production for the Southwest Federal Order (Chart IV) in late 2021 and 2022 had decreases in eight of the last 12 months.  

Chart IV - Southwest Federal Order Milk Production
Percent Change from Prior Year 

California is the largest milk producing state.  Chart V shows the changes in milk production.  The changes have been minimal with a small increase in 2020 and some small decreases in 2022.  This is consistent with when California butter production leveled off.

Chart V - California Milk Production
Percent Change from Prior Year.

Wisconsin is the second largest milk producing state.  In 2022, Wisconsin also saw a reduction in milk production growth (Chart VI).  Idaho and New York saw similar trends with no growth.  

Chart VI - Wisconsin Milk Production
Percent Change from Prior Year

Michigan and Minnesota (Charts VII and VIII) show a pattern of significantly declining milk production in 2022.

Chart VII - Michigan Milk Production
Percent Change from Prior Year

Chart VIII - Minnesota Milk Production
Percent Change from Prior Year

The above charts show that the declining growth of the milk supply is very widespread.  With tighter supplies, prices increase, and with higher prices, demand decreases.  Why is there a shortage of producer milk and butter?  There are many reasons cited in published material.  They include tight milk supplies for butter, short staffing, high feed costs resulting in reduced herd size, strong butter exports, smoke from wildfires, regional weather anomalies, supply chain issues, reduced butterfat due to falling fluid milk sales, etc.   In-other-words, the reasons for milk and butter shortages are a bit of a mystery with little specific correlations to specific events causing the shortage of milk and butter.  However, there is no shortage of milk for cheese.

Chart IX shows the Consumer Price Index for the three main uses of milk: cheese, butter, and fluid milk.

Retail butter prices have escalated the most, up 25 percent in one year.  From the recent post on butter, we know that butter production is down, inventories are limited, and commercial disappearance is lower.  Producer milk prices have benefited from higher butter and butterfat prices.  However, the higher producer butterfat values have also driven higher retail butter prices.  Butter is a commodity and with higher prices, consumption is decreasing.

By comparison, the price of cheese has a retail price increase of 14 percent, about half the increase for butter.  Cheeses are less of a commodity, which will soften consumption changes with higher prices.  Fluid milk's 11 percent price increase will accelerate the declining fluid milk category.

Chart IX - Consumer Price Index

Next up will be a post on fluid milk in non-Federal Order areas.