It’s the highest year-over-year increase since 2004-05.
“That’s huge,” says Robin Schmahl, hedging and marketing specialist with AgDairy LLC. “This is the highest year-over-year increase since 2004-05, when production rose by 6.2 billion pounds.”
USDA attributed the higher output primarily to a slower decline in cow numbers and slightly faster growth in milk per cow.
It also forecast lower cheese, butter, and NDM prices from last month on weaker-than-expected demand. Whey demand has been stronger than expected, USDA said, and the price forecast has been raised.
USDA expects 2012 Class III prices to drop to $15.80-$16.30, down about 30 cents per cwt. from April forecast. Class IV prices are projected at $14.50-$15.10 per cwt., down 85 cents from its April estimate. The 2012 All-Milk price is forecast to average $16.90 to $17.40 per cwt.
High feed prices and weakening milk prices during 2012 are expected to pressure producer returns, leading to declines in 2013 cow numbers. However, improvements in returns during 2013 will moderate the rate of decline, USDA said. Milk per cow is expected to continue to grow, supporting increased milk production. Milk production for 2013 is forecast to increase slightly, to 202.6 billion pounds, the WASDE report said.
Commercial exports during 2012 are forecast to increase as the global economy improves and milk production increases, USDA said. Imports will be slightly lower as domestic supplies increase.
Schmahl isn’t as optimistic about increased exports or the market outlook. “With all the business with Greece and concerns about China’s quarterly growth, I’m not so sure,” he said. “We’re fighting heavier production in other countries, seeing lackluster demand and building stocks that will likely limit a price rally later this year.”