Milk prices remain in a slump even as Texas dairy production and consumer demand continue to rise, according to Texas A&M AgriLife Extension Service experts.
Summertime is typically good for dairy producers as rising temperatures typically translate into higher demand and reduced production going into the dog days of summer. As a result, retail prices for many dairy-based products like ice cream, cheese and butter rise.
However, last year’s price increases for retail products never trickled down to better raw milk prices for producers, said Jennifer Spencer, Ph.D., AgriLife Extension dairy specialist, Stephenville. And while raw milk prices are slowly trending upward this summer, they are still $5 lower per hundredweight than historically high prices in 2022.
Texas dairy producers are getting around $18.50 per hundredweight for raw milk this year compared to $23 per hundredweight for most of 2022, peaking at $25.87 in June and July that year. And prices are $1 per hundredweight lower than summer 2023.
Low milk prices will make it difficult for dairy operations, Spencer said.
“Dairy producers are optimistic with the recent rainfall especially in Central Texas, which translates into better forage production,” she said. “However, drought conditions the past couple of years resulted in low forage supplies, and the benefits of this year’s rain may take a year or so to observe the benefits. Meanwhile, low milk prices will make it difficult for producers to break even, especially if they need to buy forages this year.”
Dairy production shifts with consumers
Consumer demand for dairy products remains strong, said David Anderson, Ph.D., AgriLife Extension economist and professor in the Department of Agricultural Economics, Bryan-College Station.
Per capita consumption of all dairy products grew from 538 pounds per person nationally in 2022 to 655 pounds per person in 2023. But consumption trends continue to shift away from fluid milk to other dairy staples and emerging products.
This demand for products like cheeses that require processing is pushing the industry’s capacity and still impacting dairies regionally. For example, some dairies in Wisconsin – the No. 2 dairy-producing state – had to dump milk in 2023 because there is not enough processing capacity for their output.
In Texas, Spencer said cheese processing plants in Amarillo and Lubbock have added processing capacity for regional dairies while another plant in Abilene is slated to open later this year.
Additional processing capacity will help producers in the Panhandle, where 80% of the state’s dairy production is located.
Anderson said the shift in consumer demand for dairy products has changed the milk market. The rise in demand for products like cheeses, butter and the cheese byproduct – whey – has helped erase the decreases in demand for fluid milk and ice cream.
“It really is striking to look at how our consumption of dairy has evolved,” Anderson said. “The end result is we consume as much or more milk than ever. We just do it in different ways.” Finding value for dairy products Annual consumption of fluid milk is down to 130 pounds, or 15 gallons, per person compared to 164 pounds, or 19 gallons, in 2013, Anderson said. Fluid milk consumption has continued to decline since it peaked in the early 1970s, with the average American drinking 247 pounds, nearly 29 gallons, per year.
But as fluid milk consumption declined, demand for cheese climbed. Consumption of American- style cheeses like cheddar and Monterey Jack doubled over the same period, Anderson said. In 2022, the average person consumed 16.2 pounds of these cheeses compared to just over 8 pounds in 1975. Americans also consumed 23.6 pounds of other hard and soft cheese products, including products like cream cheese and cottage cheese.
An array of other products like soft cheeses, Greek yogurt and sour cream have also offset any declines in consumer demand for dairy, Anderson said.
Dining staples like pizza or a loaded baked potato with butter, sour cream and cheese are good examples of how dairy is delivered to consumers, he said.
Newer products like whey are an enormous value-added product for each pound of milk produced, Anderson said. Whey, which was once leftover waste from the process of making cheese, has become a proteinpacked ingredient for a range of products from baby formula to pre- and post-workout powders and health bars.
Whey now carries significant weight in the dairy industry, Spencer said.
“ Whey has become a big thing,” she said. “I was talking to a cheese plant manager, and he was saying they’re now almost a whey-producing plant, and cheese is the byproduct. They’re getting so much value from it.” Milk prices challenging producer profitability Trends may be positive for the industry as a whole, but low milk prices and high input costs have not been good for dairy producers, Spencer said. Input costs like fertilizer and fuel have gone down some but remain relatively high.
Texas continues to see smaller dairy operations close or become part of larger operations, she said. In the past three years, more than 50 dairy operators/operations have either retired, closed or been consolidated. That trend is not just occurring in Texas. Since 2022, around 1,600 dairies have closed nationally.
“It’s been hard for smaller dairies to break even at these low prices, whereas larger dairies have a lower fixed cost per cow, which means more income per cow,” Spencer said.
The Texas dairy herd shrunk some, from 642,000 cows in 2023 to 635,000 cows, and dairy operations are also changing. Spencer said dairy producers are trending toward introducing beef progeny genetics into their herds to increase the value of calves in other markets. Dairies are also adding technology to reduce labor costs and add efficiency to herd management and the milking process.
“They’re looking for efficiency, different revenue streams and higher prices wherever they can,” she said. “It’s about finding profitability wherever you can with milk prices where they are.”