According to the latest Livestock, Dairy and Poultry Outlook by the USDA, the most recent USDA World Agricultural Supply and Demand estimates lowered the 2012/13 season-average price of corn to $6.75-$7.65 per bushel.

Lower expected exports lie behind the price drop. Greater expected competition from Brazil offset higher expected domestic food, seed, and industrial use. In contrast, the soybean meal price forecast was unchanged from January at $430-$460 per ton.

The outlook for forages remains precarious. The Crop Production report released February 8, 2012, estimated total U.S. hay production in 2012 at 119.9 million tons.

This estimate is about 9 percent below 2011 and 16 percent below the 5-year average. However, the drought impact is not uniform. The upper Midwest is most adversely affected, with the 2012 crop trailing last year by 29 percent. The TexasOklahoma production is expected to be nearly double 2011 totals, but 2011 was one of the worst drought years ever for the Texas-Oklahoma area.

Feed prices will continue to inch upward early this year; but for the year as a whole, feed prices should be slightly lower in 2013 than last year. The feed outlook is predicated on the lower expected corn price and a return to a more nearly normal forage yield for 2013/14.

For January, weekly dairy cow slaughter continued above the 2012 pace. The January Cattle report showed the cow population on January 1 close to 2012’s population, but producers expect to retain 2 percent fewer heifers for breeding.

Based on this evidence, cow numbers are likely to show a gradual decline over the course of 2013 and average 9,170 thousand head for the year.

The prospect of lower feed prices should prompt producers to maintain feeding rates and continue to boost yields. Milk per cow is expected to average 21,920 pounds for the year, with most of the year-over-year increase coming after the first quarter in 2013.

Total 2013 milk production is forecast at 201.0 billion pounds, another year-over-year rise. Milk-equivalent imports for 2013 were unchanged from the January forecast on both a fats and skims-solids basis, at 4.0 billion pounds and 5.4 billion pounds, respectively. Fats basis exports were unchanged for February at 9.0 billion pounds.

Skims-solids basis exports were raised slightly to 33.7 billion pounds. Firm nonfat dry milk (NDM) prices, despite higher than expected December ending stocks, suggest a potentially strong NDM export pace, at least in early 2013. Ending stocks on both a fats and skims-solids basis were trimmed in this month’s forecast based on stronger domestic demand and only a modest increase in milk production.

Dairy product prices for 2013 were only slightly changed from January forecasts. The cheese price is forecast at $1.715-$1.785 per pound, unchanged from last month, although the range was narrowed. Butter prices are projected to average $1.535-$1.635 per pound. The upper end of the forecast price range was lowered from last month, effectively lowering the midpoint of the price forecast.

Butter supplies are expected to remain relatively plentiful. NDM prices were raised slightly this month to $1.465-$1.525 per pound on the basis of current prices, continued export strength, and expected tightening stocks over the course of this year. Similar logic underlies the raise in whey prices to 61.5-64.5 cents per pound.

The Class IV price is forecast at $17.00-$17.80 per hundred-weight (cwt). This represents an increase in the lower end of the forecast range from last month and is based on the perceived strength of the powder market.

The Class III price range was narrowed from last month’s forecast to $17.70-$18.40 per cwt as cheese prices are unchanged and only a small increase is forecast in the whey price. The all milk price is forecast at $18.90-$19.60 per cwt, representing a narrowing of the forecast range.