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USDA: U.S. Milk Production to Fall; Strong All-Milk Prices for 2012 and 2013 Projected

July 11, 2012
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Feed prices are expected to pressure dairy producer returns and encourage a more rapid decline in the cow herd.

USDA has reduced U.S. milk production forecasts for 2012 and 2013 from last month as higher forecasted feed prices are expected to pressure producer returns and encourage a more rapid decline in the cow herd.

In today’s World Agricultural Supply and Demand Estimates, USDA also reduced milk per cow due to higher forecast feed prices this year and next. In addition, the agency said milk yields in the short term may be affected by recent high temperatures.

“The dairy numbers were neutral to the market,” says dairy marketing analyst Robin Schmahl of AgDairy, LLC. “The decrease in milk production was expected."

Dairy import projects were also raised, reflecting stronger imports of cheese. Exports were projected higher on stronger sales of cheese, whey, and nonfat dry milk (NDM).

USDA forecast cheese prices higher for 2012 and into early 2013 as stronger exports support prices. Butter prices are expected to rise in 2012 but weaker domestic demand is expected to
offset lower production in 2013, and the price forecast is unchanged. Weaker expected domestic demand will also limit price movements for NDM and whey. USDA reduced the NDM price outlook slightly from last month, but left its 2013 unchanged. The whey price forecasts for both 2012 and 2013 are unchanged from last month.

The Class III price forecasts for 2012 and 2013 are raised from last month due to the higher forecast cheese price. The Class IV price for 2012 is raised on the higher butter price. The 2012 All-Milk price is forecast at $17.05 to $17.35 per cwt., while the 2013 All-Milk price is raised to $17.35 to $18.35 per cwt.
 

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