The all-milk price is predicted to average between $16.05 to $16.95 per hundredweight next year, according to the USDA’s “World Agricultural Supply and Demand Estimates” report released Tuesday morning.

That would be $4 higher than this year’s predicted range of $12.60 to $12.70 per hundredweight.

“Improved milk prices are expected to more than outweigh higher feed costs and slow the pace of liquidation,” the report said. “Improving global demand and concerns about world supplies of dairy products have pushed international dairy prices higher and are expected to result in higher U.S. dairy exports during the remainder of this year and into 2010.”

Read the report here.

“Even though the price projection was raised, the response in the futures market was limited,” says Greg Scheer, dairy analyst with Doane Advisory Services

However, Scheer notes there has been an uptrend in the futures lately. “Last month, milk traded at $13.80 per hundredweight. Prices should continue to rise and we should get near break-even prices in the first quarter of 2010,” he says.

Another positive note is that cheese and butter prices continue to rally. Scheer notes that cheese and butter prices are the highest they’ve been all year. Export demand has picked up for butter. And, the month of November is the highest month for commercial disappearance of butter.

Source: USDA