US milk production slows down in July amid tighter margins

US milk production growth slowed in August, as weather conditions weighed on output in some key producing states during summer. Despite growth at the national level, weaker farmgate milk prices and deteriorating margins are adding pressure on dairy farmers. These conditions could limit further production expansion in the coming months.After the strong results recorded in the first half of the year, growth in milk production in the United States (US) slowed, although output remained consistently above the previous year’s levels. Milk collections in the 24 selected states reached 8.7 million tons in August, reflecting an increase of 1.8% compared with the previous year. Although growth remained similar to July, this represents a substantial deceleration from the 2.9% observed in the first half of the year.Compared with the consistent growth recorded across all states in June, six of the 24 selected states reported declines in milk collections in August. California was among the most significant contributors to the decline, with production dropping by 0.7% year-over-year to 1.54 million tons, despite maintaining a broadly stable dairy herd. The decline was primarily driven by lower milk yields per animal (-0.8%). A similar situation was observed in Arizona, which reported one of the largest percentage declines, with collections dropping by 3.1% to 167,829 tons.Nonetheless, most states posted increases, with notable contributions from Texas (+5.1%), Kansas (+13.9%), Wisconsin (+1.5%), and South Dakota (+8.4%). Yields remained positive in these states, while herd sizes also increased notably, indicating that the overall increase in US milk output was primarily driven by a higher number of animals in production.The slowdown in production was likely partly related to hot and dry weather conditions that affected large areas of the US from July onwards, resulting in heat stress for animals. These conditions also weighed on crop productivity and expectations for soybean and corn output, potentially affecting the future availability of feed for animal nutrition.At the same time, farmgate milk prices remained relatively weak at $20.3 per hundredweight (cwt) in July, declining by 3.8% from the previous month and by 2.4% from the previous year. Although the annual price gap has narrowed since the first quarter, when prices declined by an average of 20.1% year-over-year, milk prices have seen only a limited recovery since then. Low prices have weighed on farm profitability, as reflected in a notable deterioration in the milk-to-feed price ratio, which dropped by 9.8% to 2.12. This represents its lowest level since January.As such, the slowdown in US milk production does not appear to be driven exclusively by warmer weather conditions but also indicates that economic conditions have become more challenging for dairy farmers. This could limit the extent to which farmers expand production or result in increased culling and a contraction of the dairy herd.