Corn prices in 2010/11 are expected to be high by historic standards, averaging $5.15 to $5.65 per bushel for the crop year. USDA did not revise the corn supply, demand, and price forecast this month from last. The soybean meal price is forecast to average $340 to $370 a ton in 2010/11, and this month’s forecast was revised downward slightly from last month. Feed ingredient prices could push the 16-percent mixed ration value up by more than $2 per cwt from the $7.25 calculated for 2010.
Countering this is the likelihood of higher milk prices this year. Despite much higher expected feed prices, higher milk prices are likely supporting the modest expansion in dairy cows that began last fall and could extend for at least the first half of the year. Later this year, pressure from projected high feed prices and softening milk prices could precipitate a modest downturn in cow numbers. USDA forecasts cow numbers to average 9.17 million in 2011.
Milk yield per cow rose by nearly 2.8 percent in 2010 and is forecast to climb by only slightly more than 1 percent in 2011, a rate much closer to long-term trend. Downward revisions in output per cow in late 2010 and slower than expected growth in January contribute to the forecast. Along with this, dairy cow slaughter has been trending upward since last fall, based on year-earlier comparisons. The higher implied culling, along with an ample supply of dairy heifers, suggests that herd freshening may be underlying the expansion. The introduction of a greater number of heifers could also slow the growth rate in milk per cow in 2011. The younger cows typically will not hit their production stride in the first lactation. Annual output per cow is forecast at 21,375 pounds. That forecast and the forecast cow population will lead to about 196 billion pounds of milk being produced in 2011, an increase of almost 2 percent over 2010.
Milk equivalent imports are projected lower in 2011 on both a fats and skims-solids basis at 3.9 billion pounds and 4.7 billion pounds, respectively. Milk equivalent exports are also expected to decline in 2011 compared with last year. Milk equivalent exports are forecast at 6.7 billion pounds on a fats basis and 31.1 billion pounds on a skims-solids basis. Although lower than last year, exports on both a fats and skims-solids basis have been revised upward slightly over the last few months, as global demand has appeared to strengthen.Recent strength in domestic cheese prices may erode U.S. competitiveness in the world market. Very firm demand for nonfat dry milk and skim milk powder (NDM/SMP), along with a weak dollar, are the basis for the export forecast on a skims-solids basis. U.S. product prices are close to world prices, especially for powder products, but greater anticipated production from Oceania later this year, the result of expected large farm milk production, could limit exports. Domestic commercial use is forecast to climb in 2011 by 2.1 percent on a fats basis, a sizeable rise compared with recent years. Domestic commercial use on a skims-solids basis is forecast to rise 2.8 percent this year following last year’s contraction of 2.7 percent.
Major dairy product prices are expected to go higher in 2011. Prices were revised upward this month from February’s forecasts. Export demand for cheese and NDM boosted prices as exporters competed with domestic demand. Cheese prices are forecast to average $1.695 to $1.755 per pound for the year, and NDM prices are projected to average $1.365 to $1.415 per pound. Although seemingly high in light of reported cheese stocks, the high cheese price, along with exceptionally high December cheese exports, suggests that exports may be currently supporting the price. Extremely tight butter stocks are helping to support currently high butter prices. Later this year, continued improvement in domestic demand for cheese and butter is expected to support prices as increased milk production and lowered export prospects from rising competition work to limit prices. The butter price is expected to average $1.735 to $1.825 per pound for the year. Whey prices are forecast to average 40.0 to 43.0 cents per pound. High NDM prices may be providing some support for whey prices. The higher expected prices for the major dairy products lead to rising forecasts milk prices. Milk price forecasts will be higher this year than last, and the milk price forecast was raised in March from February projections. The Class IV price is estimated to average $16.95 to $17.65 per cwt and will average above the Class III price, which is expected to average $16.35 to $16.95 per cwt. The all milk price is forecast to average $18.10 to $18.70 per cwt in 2011.