Editorial Comment Publisher/Editor

 

 

Dairy Producers Certainly Responded To Higher Butterfat Prices

Dick Groves
Publisher/Editor
Cheese Reporter

September 17, 2021


Last year, for the first time since 2014, protein was the most valuable component on the Upper Midwest federal milk marketing order (as we reported in a story appearing on page 9 of last week’s issue), ending a five-year run during which butterfat was the more valuable component on the order.

This got us wondering what, if any, impact those higher butterfat prices over the 2015-2019 period had on dairy producers. More specifically, did dairy producers respond to those higher butterfat prices by boosting the fat content of their herds’ milk?

The answer would appear to be a resounding yes. It seems that dairy producers not only in the Upper Midwest federal order but nationwide have responded to higher butterfat prices by boosting the fat content of the milk being produced by their cows.

From a national perspective, going back four decades, there wasn’t a whole lot of change in the average milkfat content of cow’s milk for a number of years; indeed, between 1980 and 2010, it never got lower than 3.64 percent nor higher than 3.69 percent.

Interestingly, back when there was still a dairy price support program, USDA would routinely state that the support price was at a certain price per hundredweight “for manufacturing grade milk with an annual average milkfat content of 3.67 percent,” which was, as a 1989 USDA price support press release put it, the “national average” (and it was the national average in 1988). Milkfat content reliably fell within a very narrow range for years.

Things started to change in 2011, when the national average milkfat content “jumped” to 3.71 percent, up from 3.66 percent in 2010. From 2011 through 2015, the average milkfat content varied from that 2011 low to a high of 3.76 percent in 2013.

And then fat content started to increase steadily if not spectacularly, setting new record highs of 3.79 percent in 2016, 3.84 percent in 2017, 3.89 percent in 2018, 3.92 percent in 2019 and 3.95 percent in 2020.
Suffice it to say the days of stable milkfat contents under 3.7 percent are behind us.

What about at the state level? What about the fat content of milk in states that pool considerable volumes of milk on the Upper Midwest order, the subject of our story last week (and the subject of a study published every year)?

Wisconsin is by far the leading source of pooled milk on the Upper Midwest order; last year, more than three-quarters of the milk pooled on that order came from Wisconsin, and Wisconsin has been source of over 70 percent of the milk pooled on the order every year since 2014 (when it was the source of 68.4 percent of the order’s pooled milk).

Since federal order reforms were implemented starting in 2000, Wisconsin cows have generally been above the national average when it comes to milkfat content. Specifically, from 2000 through 2016, the milkfat content of Wisconsin milk ranged from 3.70 percent to 3.78 percent, with the notable exception of 2010, when it dropped to 3.65 percent.

Paralleling what was happening nationally, the milkfat content of Wisconsin’s milk then rose to 3.82 percent in 2017, 3.89 percent in 2018, 3.90 percent in 2019 and 3.92 percent in 2020. So during the period when butterfat was the most valuable component on the Upper Midwest order, the milkfat content of Wisconsin’s milk rose from 3.76 percent to 3.90 percent.

In neighboring Minnesota, average milkfat content has also historically been above the national average, and remains so today. Specifically, the milkfat content of Minnesota’s milk ranged from 3.70 percent to 3.76 percent between 2000 and 2011, then rose to 3.81 percent in 2012, first reached 3.90 percent in 2016 and has actually topped 4.0 percent over the last two years (4.05 percent in 2019 and 4.09 percent in 2020).

Minnesota’s milkfat content during the five years in which milkfat was the most valuable component on the Upper Midwest order rose from 3.86 percent in 2015 to 4.05 percent in 2019.

To more fully illustrate this pattern, we checked on the Mideast federal order, where milkfat was also the most valuable component from 2015 through 2019. We specifically checked Michigan and Ohio, the leading sources of milk pooled on the Mideast order.

Since 2000, the milkfat content of Michigan’s milk has generally been slightly below the national average, running between 3.59 percent and 3.70 percent every year through 2016. But after averaging 3.67 percent in 2016, it rose to 3.72 percent in 2017, 3.82 percent in 2018, and 3.83 percent in both 2019 and 2020.

Over the 2000-2015 period, Ohio’s average milkfat content varied within a fairly narrow range of 3.70 percent to 3.79 percent, with the exception of 2013, when it reached 3.84 percent. But after averaging 3.76 percent in 2015, it rose to 3.81 percent in 2016, 3.86 percent in 2017, 3.89 percent in 2018, 3.92 percent in 2019 and 3.91 percent in 2020.

This limited analysis does seem to confirm the fact the dairy producers responded to milkfat prices that exceeded protein prices by boosting the milkfat content of their cows’ production. This in turn begs the question:
What happens now, with milkfat less valuable than protein?

The answer appears to be: average milkfat content continues to increase.
During the first seven months of 2021, average national milkfat content was higher than a year earlier every month.

Producers know milkfat is still extremely valuable, and are responding accordingly..

 

Dick Groves

Dick Groves has been publisher/editor of Cheese Reporter since 1989. He has over 45 years experience covering the dairy industry. His weekly editorial is read and referenced throughout the world.
For more information, call 608-316-3791 dgroves@cheesereporter.com
https://twitter.com/cheesereporter.


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