Milk production is expected to continue to rise in 2011 according to the USDA’s Livestock, Dairy, and Poultry Outlook issued this morning. However, higher expected feed prices will likely limit producer profits. Domestic demand, especially for cheese, remains strong. Although world prices favor U. S. exports, they are expected to decline in 2011, more steeply on a fats basis than on a skims solids basis. Milk prices in 2011 are expected to remain near 2010 levels.
In the 2010/11 crop year; the U.S. Department of Agriculture recently lowered corn production and ending-stock forecasts. Prices are expected to average $4.60 to$5.40 per bushel in 2010/11. In contrast, soybean meal prices are not expected to differ much in 2010/11 from last year. The soybean meal price is forecast at $290 to $330 per ton this year compared with $311 the last crop year.
The expected higher corn price will push the benchmark 16-percent protein mixed-dairy ration over $8 per hundredweight (cwt) in 2011, up from about $7.30 per cwt in 2010.
Although milk prices in 2011 are forecast to remain near this year’s level, higher feed prices are expected to squeeze producer margins, impacting the size of the dairy herd in 2011. The U.S. dairy herd is expected to advance to 9,155 million cows next year, up about 0.4 percent from the 2010 projected average.
However, during the year, incentives to expand the herd will diminish. Milk per cow is also expected to advance, rising to 21,405 pounds, up 1.3 percent from this year’s expected output per cow. Growth in milk per cow is expected to slow as higher feed prices take hold. The result for the year will be nearly a 1.7-percent rise in milk production in 2011 to 196 billion pounds.
Domestic demand for dairy products, cheese especially, has been firm through2010, and demand is expected to remain strong into 2011, at least in the first half of the year. Domestic commercial use on a milk-equivalent fats basis is projected to finish 2010 at 1.4 percent above last year and forecast to rise another 1.6 percent in 2011. On a skims-solids basis, domestic commercial use is expected to finish 2010 nearly 1 percent below 2009. However, commercial use is forecast to snap back in 2011, rising nearly 2.5 percent above 2010.
The relative strength of commercial use on a fats basis is a result of strong cheese demand moving much of the added milk production to cheese production this year. Meanwhile, butter production has lagged last year’s levels every month until August when butter production edged ahead of year-earlier production.
Butter production is likely to recover into next year due to additional milk production and favorable prices.
Milk-equivalent dairy imports are projected down in 2010 to 4.1 billion pounds, fats basis, and to 4.5 billion pounds, skims-solids basis. Next year, the trend continues, as imports are likely to fall to 4.0 billion pounds, fats basis, and 4.3 billion pounds, skims-solids basis. Higher export totals are expected in 2010: 6.6 billion pounds, fats basis, up from 4.1 billion last year, and 29.3 billion pounds, skims-solids basis, up from 22.4 billion pounds in 2009. However, exports are forecast down in 2011.
Exports are projected to decline to 5.4 billion pounds on a fats basis and 28.3 billion pounds on a skims-solids basis. A gap between U.S. and international prices still favors U.S. exports and discourages imports in 2010. Next year, exports may be pressured by increased production in other exporting countries and several trade issues.
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. Cheese prices are expected to average $1.550 to $1.560 per pound this year. Continued firm cheese demand could strengthen prices somewhat further in 2011.
Next year, cheese prices are expected to average $1.540 to $1.630 per pound. Butter prices are expected to moderate in 2011, as increased milk production should make more milk available for butter and powder production. The butter price is expected to average $1.720 to $1.750 per pound this year and $1.505 to $1.625 per pound in 2011.
Nonfat dry milk (NDM) prices are forecast higher in 2011, as domestic demand improves and exports remain firm. NDM prices are expected to average $1.155 to $1.175 per pound in 2010, with a slightly higher average price of $1.175 to $1.245 per pound next year.
Whey prices are projected to average 36.5 to 37.5 cents per pound this year and to remain virtually unchanged next year at 35.5 to 38.5 cents per pound.
All milk prices are expected to average $16.45 to $16.55 per cwt in 2010 and remain about the same next year, averaging $16.00 to $16.90 per cwt in 2011.Class III milk prices are expected to average $14.65 to $14.75 per cwt in 2010 and climb slightly to $14.50 to $15.40 per cwt next year. Class IV prices could drop a bit, averaging $15.10 to $15.30 this year and $14.35 to $15.35 per cwt next year.