U.S. Milk Output Rises 2.4% in June as Cow Productivity Trumps Herd Drop

U.S. milk production increased 2.4 percent in June as a rise in per-cow output more than made up for a smaller dairy herd, according to the Department of Agriculture.

Production climbed for the fourth straight month, to 16.324 billion pounds (7.4 billion kilograms) from 15.935 billion in June 2009, the USDA said today in a report. The dairy herd fell 1.2 percent to 9.122 million head while the average cow produced 1,790 pounds of milk last month, an increase of 3.7 percent from 1,726 pounds, the USDA said.

“We had a little more milk as productivity offset the reduction in cow numbers,” said Bill Brooks, an economist for Chicago-based broker Downes-O’Neill LLC. “Temperatures were not hot enough to hurt production in June, but may trim output this month.”

Class III milk futures has gained 49 percent in the past year, due to increases in domestic demand and exports of butter and powdered milk, Brooks said. The August contract today added 2 cents, or 0.1 percent, to $14.92 per hundred pounds on the Chicago Mercantile Exchange.

The price sank to a six-year low of $9.24 in February 2009, after output set a record high in 2008. To halt losses, dairy farmers shrank their herds by sending more animals to beef plants in 2009.

The average price U.S. farmers will get for all milk this year will be $15.95 per 100 pounds, up 24 percent from 2009, the USDA said July 9. Annual production will rise 1 percent to 191.2 billion pounds from 189.3 billion last year, the government said.

Whole milk at the supermarket averaged $3.297 a gallon (3.8 liters) in June, up 11 percent from a five-year low in August, the Bureau of Labor Statistics said last week. The price was the highest since February 2009.

U.S. dairy-product exports rose 22 percent to 605,396 metric tons during the first five months of 2010 from a year earlier, USDA data show.

“The volume of exports has been slowly improving,” Brooks said. “Demand may slow down next month ahead of peaks in production in New Zealand and Australia” in October, he said.

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net.

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