Milk price outlook improves slightly

The Class III price is projected to average $13.95 to $14.35 per hundredweight in 2010, according to USDA's June 18 Livestock, Dairy, and Poultry Outlook Report. The 2010 average through May is $13.57. USDA forecasts that the Class III average for 2011 will climb to between $14.35 and $15.35 per hundredweight.

The All-Milk Price is expected to average between $15.75 and $16.15 per hundredweight in 2010 when all is said and done. The 2010 average through May is $15.28. The agency forecasts a slight rise in the 2011 All-Milk Price to between $15.80 and $16.80. This a 10-cent-per-hundred jump from the previous estimate.

Feed corn prices are projected to be $3.45 to $3.65 per bushel for the 2009/10 crop year and to rise to average $3.30 to $3.90 in 2010/11. Likewise, soybean meal prices are expected to average $295 per ton this year and $230 to $270 next year.

The U.S. herd is expected to average 9.075 million cows in 2010 and 9.040 million in 2011. Milk production per cow is expected to increase nearly 2 percent in 2010 over 2009 to about 20,980 pounds per cow. In 2011, production per cow is forecast to rise another 1.8 percent to 21,355 pounds. The expected increase in milk per cow will provide 190.4 billion pounds of milk in 2010 and 193 billion pounds in 2011.

Lower milk production in Oceania has tightened world supplies of major dairy products. The impact on U.S. markets is to lower milk equivalent imports on both a fats and skims-solids basis and support exports. Exports of cheese, butter, and nonfat dry milk (NDM) were all higher in April, and the difference between U.S. and international prices remain favorable for U.S. exports. However, the strong U.S. dollar relative to the Euro and relatively large European Union (EU) intervention stocks of powder could be factors that limit U.S. powder exports.

Milk equivalent exports are projected to reach just over 5.0 billion pounds this year and 5.1 billion in 2011 on a fats basis. The corresponding

export forecasts on a skims-solids basis are about 26 billion pounds and 27.1 billion pounds.

While demand, both foreign and domestic, is recovering, continued increases in the milk supply will keep prices from rising appreciably. Cheese prices are forecast to average $1.485 to $1.525 per pound this year and rise slightly to $1.520 to $1.620 per pound next year. Butter prices are projected to average $1.475 to $1.545 per pound both this year and slip to average $1.390 to $1.520 next year.

Improving domestic demand for these products has firmed prices, but higher milk supplies will keep a lid on prices. Nonfat dry milk prices are forecast to average $1.200 to $1.240 per pound in 2010 and rise to average $1.235 to $1.305 per pound next year. Tight international supplies and the expectation of stronger exports support the expected higher prices. Whey prices are forecast to average 36.5 to 38.5 cents per pound and rise fractionally to 37.5 to 40.5 cents per pound in 2011.