We can expect milk production to continue to improve as we move through the year. Weather can impact milk per cow and crop conditions. The severe drought in California will likely to substantially increase the price of alfalfa hay later this year, and could impact the level of milk production recovery in the state.
As of now, USDA is projecting 0.4% increase in the average number of milk cows for the year, and 1.9% more milk per cow, resulting in an increase of 2.2% in total milk production.
No doubt with favorable weather and good crops this summer milk prodcution will continue to improve. Milk prices will average higher for the first half of the year than for the last half. But, as of now, it appears that milk prices will average higher for the year than 2013, setting a new record high.
Dairy futures are quite optimistic, with Class III above $20/cwt. through April, above $19/cwt. for March through June, and not falling below $18/cwt. until December. But, if USDA is correct on their forecast for milk production, Class III prices could well end up lower than this for the last half of the year, but staying above $17/cwt. until the end of the year is quite likely.
Even if prices do end up at this lower level, with lower feed costs, 2014 is shaping up to be good year for dairy producers – and they deserve it.