USDA has hiked its forecast for milk production in 2010 to 189.5 billion pounds, up from 188.9 billion pounds a month ago and 189.3 billion pounds in 2009.

All-milk price will average $15.55 to $16.15 per hundredweight, down from last month’s projection of $16.20 to $16.90, the USDA says in its monthly World Agricultural Supply and Demand report released March 10.

Dairy producers culled thousands of cows last year in the wake of a milk price crash, but herd contraction appears to be waning, the USDA indicates. Additionally, export demand for some dairy products, such as skim solids, was weaker than expected early this year.

“Cow slaughter is relatively low and January milk cow numbers were higher than expected,” the USDA says. The pace of herd reduction “slowed from last month.”

A slide in corn prices in recent months has already provided a boost for livestock producers’ profit outlook, and they may see further benefit amid lower than expected overseas demand, USDA data show.

The USDA cut its forecast for U.S. corn exports during the 2009-10 marketing year, to 1.9 billion bushels from 2 billion bushels, and raised ending stocks, to 1.799 billion bushels from 1.719 billion bushels.

Farm prices for corn are expected to average $3.45 to $3.75 per bushel in 2009-10, down from a previously-forecast range of $3.45 to $3.95, the USDA says.