Reading the milk price/feed cost tea leaves

Hoard's Dairyman: 

Reading the milk price/feed cost tea leaves

Date: 
Thu, 05/13/2010

Two releases in recent days help shed light on the milk price and feed cost scene in the months ahead. USDA's monthly World Agricultural Supply and Demand Estimates and USDA's Crop Production were released earlier this week.

The WASDE report provided USDA's first look at 2011 milk supply, demand, and prices. Milk production for 2011 is forecast to go up as producers respond to improving returns. Cow numbers are expected to be lower than this year, according to the USDA, but the rate of decline is expected to slow. However, this prediction is interesting as cow numbers have been up slightly so far this year. Milk per cow, which has driven up total production this year, is expected to grow by about the same amount next year.

We could see declining stocks of dairy products as we move toward 2011, according to the agency. Both domestic and export demand should rise as economies here and abroad strengthen. However, we also might see a slight growth in imports

Class III prices are forecast to be higher than 2010. USDA forecasts a Class III midpoint for 2011 of $14.75 with a range of between $14.15 and $15.25. The midpoint forecast for the All-Milk Price in 2011 is $16.20 with a range of between $15.70 and $16.70.

Corn futures rose after USDA released forecasts of inventory levels. Tuesday, corn futures shot up nearly 7 cents a bushel to settle at nearly $3.70. According to the Wall Street Journal, traders at the CBOT were looking at greater corn demand for export as well as for ethanol production. However, the corn crop appears to be off to a great start. Eighty-one percent of the corn is in the ground and 39 percent is emerged. Last year at this time, only 13 percent was emerged and the five-year average is 21 percent emerged.

http://www.usda.gov/oce/commodity/wasde/latest.pdf