It may be small consolation to dairy farmers suffering through a bad year, but the U.S. Department of Agriculture continues to project improvements in the spread between corn prices and milk prices.

And, the projected increase in milk prices ― 60 to 70 cents per hundredweight for the yearly average ― might even bring about a sense of optimism, although a much bigger increase is needed to erase some of the losses experienced this year due to high feed costs.

According to the USDA’s “World Agricultural Supply and Demand Estimates” report released this morning, the all-milk price will average between $18.50 and $18.60 per hundredweight this year, compared to its estimate of $17.80 to $18 in last month’s report. To see the report, click here.

The Class III milk price for 2012 is projected at $17.55 to $17.65 per hundredweight.

Next year, the USDA is projecting that the all-milk price will average between $19 and $19.90 per hundredweight.

Meanwhile, the corn price projections for the crop year beginning Sept. 1 continue to be projected downward ― $7.10 to $8.50 per bushel compared to last month’s estimate of $7.20 to $8.60 per bushel.

Here’s what USDA economists had to say about the overall dairy situation.

“The 2012 milk production forecast is reduced from last month, as slower growth in milk per cow more than offsets a slower expected decline in cow numbers. Higher forecast milk prices in late 2012 and into 2013 are expected to slow the rate of decline in cow numbers and help support higher growth in milk per cow in 2013. Thus, the production forecast for 2013 is raised….

“Product prices are forecast higher for 2012 and 2013 as recent strength in dairy product demand is expected to carry into 2013. Forecasts for butter, cheese, nonfat dry milk, and whey are raised from last month. With higher product prices, both the Class III and Class IV price forecasts are raised. The all milk price is forecast at $18.50 to $18.60 per cwt for 2012 and $19.00 to $19.90 per cwt for 2013.”