Cropp: Summer weather an important factor for milk prices

“Butter prices may well weaken more but yet remain relatively high. Butter producers have been somewhat reluctant to build up stocks in fear that high butter prices were not sustainable. Butter production increased just 2.7 percent in January over a year ago. Butter stocks increased 46 percent from December to January, but remain 29 percent below a year ago and the lowest stocks for this date since 2005. Butter exports were strong in 2010, up 99 percent from the year before and accounted for about 8 percent of butterfat production. Butter as well as cheese exports for 2011 are expected to be favorable but considerably lower than last year levels.

“Cheese prices could well rebound some increasing the Class III price by summer and fall. But, this will require a slowdown in milk production. USDA’s estimate of February milk production was up 2.4 percent from a year ago for the 23 reporting states and up 2.0 percent for U.S. as a whole. For the U.S. cow numbers did not increase in February but were 0.7 percent higher than a year ago. Increases in milk per cow appear to be slowing some with February’s production per cow 1.3 percent higher than a year ago.

“Of the 23 reporting states 19 had higher milk production than a year ago. The 4 states with less milk production were Illinois -3.2 percent, Missouri -2.7 percent, Utah -0.7 percent and Pennsylvania -0.2 percent. Florida led all states with relative increases in milk production with February’s production 12.2 percent higher than a year ago. All Western states continue with increases in milk production with production up as much as 8.8 percent in Texas, 7.3 percent in Arizona, 5.7 percent in Colorado, and 3.4 percent in Idaho. Production was up just 2.4 percent in California. For the Northeast, as indicated, production was down 0.2 percent in Pennsylvania but 3.8 percent and 2.7 percent higher respectively for New York and Michigan. In the Upper Midwest production was up just 0.5 percent in Wisconsin and 1.2 percent in Iowa with production down 0.8 percent in Minnesota.

“Milk production is likely to show relatively smaller increases as we approach summer. Corn prices remain at high levels. February hay prices at the national level are 15 percent higher than a year ago with prices up as much as 56 percent in California and 39 percent in Idaho. With lower milk prices returns over feed costs will be squeezed encouraging increase herd culling and reduced grain and concentrate feeding. With 3 percent more replacement heifers to calve this year the average number of milk cows for the year may not decline from last year, but a smaller increase in milk per cow could hold the increase in total milk production for the year below 2 percent. Then if domestic sales can continue to show growth as well as favorable dairy exports, Class III prices will strengthen the last half of the year reaching at least the high $16′s. Summer weather conditions for cow comfort and growing conditions for crops will also be an important factor determining were milk prices will be later this year.”

Source: University of Wisconsin Cooperative Extension

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