USDA: High Milk Production Will Temper Prices, Despite Improving Demand

June 25, 2010 06:16 AM

Source: USDA Dairy Market News


While both foreign and domestic demand is recovering, continued increases in the milk supply will keep milk prices from rising appreciably, USDA said in its Dairy Market News for June 21-25.


The U.S. all-milk price is expected to average $15.75/cwt. to $16.15/cwt. in 2010, with a slight rise to $15.80/cwt. to $16.80/cwt. in 2011.


USDA projected the Class III price to average $13.95/cwt. to $14.35/cwt in 2010, and to climb to $14.35/cwt. to $15.35/cwt in 2011. Class IV milk prices are forecast to average $14.45/cwt. to $14.95/cwt. this year and to rise slightly to $14.35/cwt. to $15.45/cwt. in 2011.


The strength of the Class IV price relative to the Class III price indicates the shift to butter powder relative to cheese, and could help firm cheese prices, USDA said.


As some relief for dairy producers, feed prices are expected to remain moderate in both 2010 and 2011.

  • Corn prices are projected to be $3.45/bu. to $3.65/bu. for the 2009-10 crop year and to rise to average $3.30/bu. to $3.90/bu. in 2010-11.
  • Soybean meal prices are expected to average $295/ton this year and average $230/ton to $270/ton in 2010-2011.

Prices for feed ingredients have pushed the price of the 2010 benchmark 16% protein dairy feed ration 10% below 2009. Early forecasts are that the price of the ration will increase only slightly in 2011. Moderate feed costs may slow the rate of decline in the number of cows in the dairy herd.


The May Livestock Slaughter report showed dairy cow slaughter in April above the corresponding month in 2009. The relatively high slaughter rate, combined with the large number of retained heifers, as indicated in the January Cattle report, suggest that the U.S. dairy herd was being freshened.


The U.S. herd is expected to average 9,075,000 cows in 2010 and contract fractionally to average 9,040,000 in 2011. This represents a small year-over-year contraction compared with the 1.2% and 1.4% year-over-year declines observed in 2009 and 2010, noted USDA.


The Cooperatives Working Together program is offering another herd buyout, with the majority of cows purchased expected to move to market during the summer quarter.


The herd liquidation appears to be slowing; however, the feed price forecast for both this year and next, along with herd freshening, will combine to boost output per cow.


Milk production per cow is expected to increase nearly 2% in 2010 over 2009 to about 20,980 lb./cow. In 2011, production per cow is forecast to rise another 1.8% to 21,355 lb. The expected increase in milk per cow will provide 190.4 billion pounds of milk in 2010 and 193 billion pounds in 2011; both forecasts represent yearly increases in milk production from a slightly smaller herd compared with recent years.


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