USDA Predicts Higher Feed Prices Will Limit 2011 Dairy Profits

October 22, 2010 10:21 AM

U.S. milk production is expected to continue rising in 2011, but anticipated higher feed prices will likely limit producer profits, USDA’s Economic Research Service (ERS) said today in its Livestock, Dairy and Poultry Outlook.

With USDA’s recent lowering of corn production and ending-stock forecasts, corn prices are predicted to average $4.60/bu. to $5.40/bu. in 2010-11, well above last year’s $3.55/bu. average, ERS said. The expected higher corn price will push the benchmark 16% protein mixed dairy ration over $8/cwt. in 2011, up from about $7.30/cwt. in 2010.
All-milk prices are expected to average $16.45/cwt. to $16.55/cwt. in 2010. They should remain about the same next year, averaging $16.00/cwt. to $16.90/cwt. in 2011, said ERS.
Although 2011 milk prices are expected to remain near 2010 levels, the feed-price squeeze on producer margins is likely to impact the size of the U.S. dairy herd in 2011, noted ERS. Cow numbers are expected to increase to 9.155 million next year, up about 0.4% from the 2010 projected average. ERS also said that incentives to expand the herd would diminish during the year.
ERS also expects milk per cow to rise to 21,405 lb., up 1.3% from this year’s output. The result for the year will be nearly a 1.7% rise in 2011 milk production to 196 billion pounds.
Relatively strong demand for dairy products in both 2010 and 2011 should be countered by continued rising milk production to keep milk prices near current levels into 2011. A gap between U.S. and international prices still favors U.S. exports and discourages imports in 2010, ERS said. Next year, exports may be pressured by increased production in other exporting countries and several trade issues.

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