USDA: Despite High Feed Prices, U.S. Milk Production Rises

April 15, 2011 11:41 AM

Source: USDA’s Economic Research Service Livestock, Dairy, and Poultry Outlook

U.S. milk production continues to increase despite high feed prices, while rising domestic commercial use and exports are maintaining dairy demand and prices, USDA’s Economic Research Service (ERS) reported yesterday in its monthly Livestock, Dairy, and Poultry Outlook.
Feed prices are expected to remain high throughout 2011. Even so, milk output is expected to continue to rise, based on slightly higher cow numbers and increased output per cow, ERS noted. Milk equivalent exports on both a fats and skims solids basis will trail last year but are still significant enough to help support prices above 2010 levels. Forecast increases in commercial domestic use should also provide support prices as exports could weaken later in the year.
Feed prices at historic highs
Feed prices are expected to remain high by historic standards. Corn prices are forecast at $5.20 to $5.60 per bu. in 2010-11. Corn producers indicated intentions to plant 4 million acres more corn according to the Prospective Plantings report released last month. The forecast corn price is well below reported spot prices in central Illinois. This is because USDA forecasts reflect expected National Agricultural Statistics Service (NASS) prices received by farmers. Early season forward contracting of corn prices means the NASS farm price lags prevailing cash market prices.
Soybean meal prices are forecast to average $340 to $360 a ton for 2010-2011. Soybean acreage is expected to be down slightly this spring from last year’s record. Last month’s quarterly grain stocks report showed corn stocks down 15 percent from last year and soybean stocks also down by only 2 percent from last year. Overall, the feed situation is likely to remain tight in 2011, keeping prices firm.
Higher alfalfa hay prices expected
The expected expanded planting of field crops could support higher alfalfa hay prices. The outcome for dairy producers is continued high feed prices. The latest Milk Production report shows U.S. milk cow numbers for January and February in surveyed states above the corresponding period last year, as is milk per cow. In contrast, the Livestock Slaughter report shows dairy cow slaughter continuing ahead of a year ago, and high manufactured beef prices have increased prices for cull cows.
These data suggest that replacements exceed culls nationally and that freshening of the national herd continues. The U.S. dairy herd will likely increase fractionally in 2011 to 9.165 million head, up from 9.117 million last year.
Milk per cow is also forecast to rise this year, but by only a near-trend 1% compared with a 2.8% year-over-year increase last year. The small increases in herd size and milk per cow will move up production to 195.9 billion pounds of milk in 2011.

Dairy exports remain strong
Milk equivalent imports are forecast at 3.7 billion pounds for the year on a fats basis and 4.8 billion pounds on a skims-solids basis. Imports on a skims-solids basis are virtually unchanged from 2010.
Milk equivalent exports on a fats basis are forecast to total 7 billion pounds for 2011; this is a decline from 2010’s totals, but the April 2011 forecast was increased from the March forecast based on stronger than expected exports of butterfat and cheese. Milk equivalent exports on a skims-solids basis are forecast at 31.3 billion pounds, a small decline from 2010. The April skims-solids export forecast was increased from the March forecast due to the high level of nonfat dry milk (NDM) shipments registered in January.
For the second half of 2011, exports may weaken relative to the first half as increased competition from Oceania is expected to erode the competitive U.S. position. Nevertheless, the relative weakness of the U.S. dollar and strong global demand will help maintain exports at a strong pace.
Domestic dairy demand improves as economy recovers
Domestic commercial use is expected to rise on both a fats and skims-solids basis in 2011. Expected continued economic recovery underpins the forecasts. Commercial use on a fats basis is forecast to rise by nearly 1.8% in 2011 over 2010, the strongest year-over-year rise since 2006. Skims-solids commercial use is set to rise by 2.7 percent in 2011 after falling by an equal amount in 2010, making skim-solids commercial use in 2011 the same as in 2009.
Major dairy product prices are expected to go higher in 2011 compared with 2010, but 2011 price forecasts for cheese and butter were revised downward this month from the March forecast. Both cheese and butter prices have weakened recently, and cheese stocks have been relatively high. NDM prices are virtually unchanged from last month’s forecast, based on expected continued strong exports.
Cheese prices are forecast to average $1.665 to $1.715 per lb. for the year. NDM prices are projected to average $1.375 to $1.415 per lb. The butter price is expected to average $1.735 to $1.815 per lb. for the year. Whey prices are forecast to average 41.0 to 44.0 cents per lb. High NDM prices may be providing some support for whey prices.
Higher milk price forecast
Milk price forecasts will be higher this year than last, but the Class III price forecast was lowered slightly this month from March projections. The Class IV price, raised fractionally from last month based on stronger NDM prices, is estimated to average $17.05 to $17.65 per cwt. This will average above the Class III price, which is expected to average $16.10 to $16.60 per cwt. The all-milk price is forecast to average $18.15 to $18.65 per cwt. in 2011.

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Spell Check

4/15/2011 04:16 PM

  Just like the weather forcast.............

4/15/2011 04:17 PM

  Just like the weather forecasts

4/18/2011 01:02 PM

  What "high" feed prices?? If there isn't enough profit in the livestock sector then we need higher livestock prices, not lower grain prices. We've been stuck on that road for the past 200 years.


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