With high feed prices increases in milk production of no more than 1% seems likely for the remainder of the year. High feed prices will hold down increases in milk per cow. With lower milk prices the returns over feed costs with decline and this will likely increase cow slaughter. The result will help to hold milk prices at relatively higher levels. By the end of the year both the Class III and Class IV prices could be in the $17 to $18 range and the U.S. All Milk price in the $18 to $19 range. However, there are some who are forecasting lower prices due to a sluggish U.S. economy affecting domestic demand and lower dairy exports. Lower prices are definitely possible. But, if prices turn out much lower both the number of cows going to slaughter and producers deciding to exit the business would likely increase adjusting downward the level of milk production and adjusting milk prices upward.
Source: Bob Cropp, Professor Emeritus University of Wisconsin Cooperative Extension University of Wisconsin-Madison