According to the USDA's Livestock, Dairy and Poultry report, February cow numbers were higher than anticipated in light of mediocre producer returns and relatively high cow slaughter during the last two quarters. Still, a reduction in herd size is expected late this year, but the decline is projected to be less than expected last month. As a result, cow numbers for 2012 were raised slightly from last month to 9,215 thousand head.

Corn prices are forecast at $6.00 to $6.40 per bushel in 2011/12, a narrowing of the price range by 10 cents on each end. Soybean meal prices are projected higher this month at $335 to $355 per ton. This slightly more adverse feed outlook for producers, combined with higher cull cow prices and lower milk prices over the course of the year, is likely to lead to lower cow numbers by year-end.

Production per cow was raised again in April as the February Milk Production report indicated higher milk per cow than previously expected. Ideal weather in most of the United States likely contributed to cow performance. Production per cow is likely to remain above trend this year as a result of the mild winter and the heavy slaughter that has removed marginal producers from the herd. Annual production per cow in April is forecast at 21,825 pounds for 2012. Consequently, milk production was increased to 201.1 billion pounds in the April forecast from last month’s 199.7 billion-pound forecast.

Fats basis imports were unchanged from last month at 3.3 billion pounds. Cheese imports were revised lower, but the decline was offset by forecast increases in butterfat, whole milk powder, and ice cream. Imports on a skims-solids basis were increased to 5.4 billion pounds, up from 5.1 billion forecast in March. The increase is based on expected growth in casein imports. World supplies of milk proteins are expected to be higher and prices lower this year. Fats-basis exports were reduced to 8.4 billion pounds from 8.6 billion pounds.

The year-to-date totals suggest that butter exports will be below earlier expectations. Exports of fluid milk and cream, largely to Mexico and Canada, will likely be lower than earlier expected. Exports on a skims-solids basis were raised to 32.8 billion pounds from 32.3 billion pounds. Year-to-date exports to Mexico and Asian countries have been stronger than earlier expected. Despite the higher early totals, exports for the year are unlikely to match last year.

Commercial ending stocks are forecast at 11.8 billion pounds on a fats basis and 12.0 billion pounds on a skims-solids basis, both up from March’s projections. Larger than expected supplies of cheese and NDM were reported in storage in February, which—combined with the higher forecast milk production—is likely to lead to higher than previously forecast stocks.

Ample stocks of dairy products and higher milk production lead to a lower price forecast in April for all major dairy products. Prices forecast for cheese, butter, and NDM are below both March forecasts and 2011 average prices. The cheese price is forecast at $1.590 to $1.640 per pound. Butter is projected at $1.490 to $1.570 per pound, and NDM prices are projected at $1.300 to $1.340 per pound. Whey prices, which have run counter to the downward price trend for other products, are now forecast lower this month at 55.0 to 58.0 cents per pound. While the April forecast whey price is lower than in March, it is still above the 2011 average price.

Milk price forecasts were lowered this month as well. The Class III price was reduced to $16.10 to $16.60 per cwt, and the Class IV price was lowered to $15.35 to $15.95 per cwt. The all-milk price is now forecast at $17.25 to $17.75 per cwt.