U.S. Milk Output Increases As Higher Prices Spur Productivity

U.S. milk output increased 1.3 percent in May, the Department of Agriculture said, as climbing prices spurred farmers to increase productivity.

Production rose to 17.27 billion pounds from 17.04 billion in May 2010, the USDA said today in a report. The dairy herd totaled 9.2 million head last month, up 0.9 percent from a year earlier, while the average cow produced 1,877 pounds of milk, up 0.4 percent.

"Relative to last year, we're still looking at more milk per cow and more cow numbers," Bill Brooks, an economist with INTL FCStone, said before the report. Farmers are "trying to maximize their facilities."

Class III milk futures reached a 35-month high of $20.27 per 100 pounds on June 6 amid climbing demand for U.S. dairy products. The July contract fell 5 cents, or 0.2 percent, to $20.04 at 12:59 p.m. on the Chicago Mercantile Exchange. Before today, the commodity rose 48 percent in the past year.

A cool, wet spring in parts of the U.S. has delayed pasture growth in some areas and is "negatively impacting the feed quality that cows are getting," Brooks said. This could limit the growth per-cow output going forward, he said.