USDA is projecting commercial use of dairy products will rise 1.1 to 1.4% in 2010. Exports are also expected to rebound from 2009, the agency reported in its Livestock, Dairy and Poultry Outlook
released this morning.
Bottom line, USDA expects the U.S. all-milk price to average from $16.20 to $16.90 in 2010. That compares to the 2009 average of just $12.81. At the mid-point of the 2010 forecast, that suggests a 28% improvement over 2009 prices.
On a skim-solid basis, commercial use is forecast to rise from 166.4 billion lb. in 2009 to 168.3 billion lb. this year. A fat basis, the numbers show a 2.6 billion lb. increase to 188.8 billion lb. "Commercial use rose in 2009, mostly due to low prices, but the commercial use forecast this year will hinge on the strength of the economic recovery in light of higher expected prices,” says USDA economists.
Dairy exports are also forecast to rebound 13% to 25.7 billion lb. on milk equivalent skim-solid basis. But there are flies in the ointment. Most notably, the European Union had168.4 million lb. of butter and 571.7 million lb. of non-fat dry milk in inventory at the end of 2009. How it decides to dispose of those stocks will play a key role in how quickly export markets recover. The stronger value of the dollar versus the euro also will play a role.