But, as we move through the year we can expect milk production to pick up as milk cow numbers increase and milk per cow improves. Despite rather high slaughter cow prices, dairy cow slaughter thus far this year has been 9% below a year ago. With favorable margins, lower producing cows that normally would be culled are still profitable to milk.
Milk production is also improving in the major exporting countries of the EU-28, New Zealand, and Argentina with Australia the exception. So, more dairy products will be available for export. But, with current world stocks of dairy products rather tight and world demand remains strong led by China, it will take some time to rebuild stocks. U.S. exports may slow the last half of the year, but yet total 13% to 14% of U.S. milk production on a total solids basis for the year.
So, we can expect milk prices to average lower for the second half of the year, but no sharp decline in milk prices is anticipated. The Class III price, now over $23/cwt., is likely to be in the $20 to $19 range by early summer, and end the year near $18/cwt. If this holds, the Class III price for the year will average well over $19/cwt., compared the average of $17.99/cwt. last year. The U.S. all milk price will average over $21/cwt. compared to $20.01/cwt. last year. Current Class III futures are at levels that would support prices even a little higher than this.