U.S. milk production continues to climb; prices are expected to decline in 2012

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Feed prices are expected to remain relatively high through the end of 2011 and into next year. Corn prices are forecast at $6.20 to $7.20 per bushel for the 2011/12 crop year. This forecast represents a small reduction from September’s forecast prices and is based on higher reported carry-in stocks and slightly lower projected corn exports. Similarly, the soybean meal price forecast was lowered from September to $335 to $365 per ton for the 2011/12 marketing year, based on a lower soybean export forecast in October. Preliminary estimates placed alfalfa prices at $196 per ton in September in the face of almost 5 percent lower production in 2011. Significant relief from the current prices level is not likely until next spring.

Milk production for 2011 is projected at 195.9 billion pounds, a 200-million pound increase from September’s forecast. Both higher cow numbers and yield per cow contribute to rise. Despite high feed prices and continued heavy cow slaughter, the U.S. dairy herd continues to expand more rapidly than anticipated. The herd is forecast to average 9.2 million head for the year. Yield per cow has also risen more rapidly than anticipated and is forecast at 21,300 pounds, an increase from September estimates. Output per cow may not have been as diminished by the hot summer temperatures as expected.

In 2012, the U.S. dairy herd is expected to contract to 9.19 million head. This forecast represents both a year-over-year decline and a decline from the September 2012 forecast. Although corn and soybean meal prices have been revised downward, they remain high by historic levels and continued expected high alfalfa prices along with lower milk prices will likely stimulate a herd reduction during 2012. These fundamentals will also limit the rise in output per cow next year, which is forecast at 21,600 pounds despite an extra milking day in 2012.

Milk-equivalent imports for 2011 are forecast at 3.2 billion pounds on a fats basis and 5.3 billion pounds on a skim-solids basis this year, both unchanged from September’s forecast. Next year, fat-basis imports are forecast unchanged at 3.2 billion pounds but skim-solids imports are expected to slide to 5.1 billion pounds, also unchanged from September’s forecast. Fat-basis exports are forecast at 9.1 billion pounds for 2011, a slight downward revision from September’s forecast due to lower expected butter and cheese exports.

Favorable conditions in Oceania coupled with rising seasonal production are expected to pressure prices and increase competition particularly for U.S. dairy exports in 2012. Skim-solids exports are forecast at 32.6 billion pounds this year, unchanged from September. In 2012, milk-equivalent exports on both a fats and skim-solids basis are forecast to be lower than in 2011. Fat-basis exports are forecast at 8.6 billion pounds, down fractionally from September’s forecast. Skim-solids basis exports are placed at 31.9 billion pounds, a decline from September’s projection.

This year, domestic commercial milk use is forecast to reach 188.6 billion pounds on a fats basis and 167.8 billion pounds on a skim-solids basis. In 2012, domestic commercial use is forecast to rise to 192 billion pounds on a fats basis and 170.8 billion pounds on a skim-solids basis. Both forecasts would represent a healthy rise in use; especially for the fats basis forecast after several years of slow growth.

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Chris Fuchs    
Fort Plain, NY  |  October, 21, 2011 at 09:23 AM

Poor reporting in this article - you present a piece entitled in part "... Milk Prices expected to decline in 2012", and do not present either the current price of milk or the price to which it expected to decline. Basic journalism tenets being ignored..

Jackie Schmidts    
Lake Placid  |  October, 21, 2011 at 11:50 AM

Since the uniform price dairy farmers recieved this year hit an all time record high in August, a decline sounds like a bad situation. Although the price that is forecasted for 2012 is still pretty good. I'm concerned the federal governement might implement a national mik supply program, this would really hurt our industry!

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