188,000 head down, but so many more still to go

Even the combined effects of the two biggest CWT herd retirements ever, Rounds 7 and 8 held this year, are unlikely to make milking cows profitable again anytime soon.

Granted, 188,000 fewer cows and 3.8 billion pounds less milk will put a dent in the problem. But they won’t fix it. The big reason is the estimated loss of 6.9 billion pounds of U.S. dairy product exports in 2009 due to the global recession. Any losses in domestic use will only add to that number.

Also worrisome is that, as 2009 has unfolded, the onset of roughly break-even Class III futures prices ($15) at the Chicago Mercantile Exchange have kept receding into the distance like a teasing mirage in the desert. At the end of April, $15 milk was on the board starting in January 2010. At the end of May, $15 had backed off until March 2010. At the end of July, $15 was back but not until April 2010.

One explanation why may be that traders at the CME don’t believe that eliminating 188,000 cows and 3.8 billions pounds of milk is going to translate into a shortage of dairy products anytime soon.

Another is the inflow of extra heifers into the national milking herd that are the result of sexed semen use. Ray Nebel, senior reproduction and dairy herd management specialist at Select Sires, says that while only a few thousand such animals began milking in 2008, he estimates 63,000 will do so this year, and 161,000 more are in the pipeline for 2010.

That’s why, although so many cows have already been removed, many more still need to go.