USDA bumps up milk price forecast slightly

Hoard's Dairyman: 

USDA bumps up milk price forecast slightly

Thu, 10/14/2010

USDA’s October forecast of milk production for 2010 is raised slightly from last month as higher milk per cow more than offsets lower cow numbers. The agency now puts the 2010 estimate at 192.8 billion pounds which would be up 3.5 billion pounds or 1.85 percent from 2009.

But the forecast for 2011 is reduced to 196 billion pounds from 196.2 billion, as higher feed prices are expected to slow the rate of growth in cow numbers and milk per cow compared with last month’s estimate. However, the October forecast was prepared before the lower crop estimate was released last Friday which sent corn futures toward $6 a bushel.

The agency expects continued strength in demand for cheese and relatively tight supplies of butter. That situation supports higher forecast prices for 2010 and 2011. Price forecasts for nonfat dry milk (NDM) are raised for 2010 and 2011 as supplies are tighter. The 2010 whey price forecast is increased slightly but is unchanged for 2011. Both Class III and Class IV price forecasts for 2010 and 2011 are raised due to the higher product prices.

The All Milk Price is forecast to average $16.45 to $16.55 per hundredweight for 2010. The average through September is $15.77.

USDA forecasts the All Milk Price to average between $16.00 and $16.90 per hundredweight for 2011. The All Milk Price averaged $12.83 in 2009 and $18.32 in 2008.

The agency's forecast for the Class III price average for this year was raised by about a dime to a midpoint of $14.70. The average through September this year is $14.07. USDA forecasts the 2011 Class III price to average between $14.50 and $15.40. As of yesterday, Class III futures for all of 2011 averaged $14.67. The Class III average was $11.36 in 2009 and $17.44 in 2008.