Monthly Dairy Market Update - August 27, 2020

Each year, shifting weather patterns cause floods, droughts, heat waves, excessive humidity, and blizzards. When and where these events occur, combined with their longevity and severity, can redirect dairy markets. For decades, dairy producers have invested in technology to combat Mother Nature’s annual onslaught. Often these measures mute the impact of weather on milk production, but sometimes Mother Nature prevails and alters the course of markets.

Some weather impacts are typical while others are unexpected. For example, heat in mid-summer is an annual event, but occasionally it is severe enough to change market direction. But it’s not just about the number of consecutive days of sweltering heat that matter. The type of farm operation that’s affected also has a bearing. Are cows housed in barns with misting and cooling systems? Or are they standing on pasture? Heat alone doesn’t determine cow comfort, but heat and humidity often combine to negatively impact output. Humidity determines evaporative heat loss and whether cows can efficiently dissipate heat, while the temperature heat index (THI) indicates whether cows experience heat stress—a complicated way of saying that cows can tolerate higher temperatures when humidity is low and vice versa.

This August, temperatures soared to record highs in California, yet despite the extreme heat, humidity was relatively low, resulting in a THI that suggests dairy cows in the Fresno area were under mild to moderate stress. Compared to U.S. heat waves, similar events in Europe can have a larger impact because many farms are pasture based, which could explain why in some European countries, and not others, recent heat waves caused decreased daily intake in dairy cows.

At the other extreme, rain and snow can significantly impact crops and pasture. Each year, a delicate balance exists between too much and too little moisture. The impact is often complicated by timing and dependent on farm technology. Is weather affecting a region with dairies that are largely pasture based or is the region heavily reliant on irrigation? Just this year, an Indian dipole shifted rain patterns over the Indian and Pacific oceans, providing much needed relief to parched Australia. In turn, Australia’s milk production lifted to close a sizeable gap in year-over-year production.