The outlook is for continued high feed prices in both 2011 and 2012. The corn price is forecast to reach a record $5.50 to $6.50 a bushel in 2011/12, up from $5.10 to $5.40 this year. Although plantings are expected to rise 4 million acres and yields should recover from last year’s weather-reduced yields, stocks remain near historic lows. Soybean meal prices are forecast to rise in 2011/12 to $350 to $380 a ton, up from $350 a ton in 2010/11. Soybean prices are projected to be higher next year, based on lower production this season. Higher ingredient prices will continue to keep feed ration values high in 2012.
Although dairy producers have faced exceptionally high feed prices, high milk prices have helped producers remain profitable. The calculated milk-feed price ratio is expected to remain near 2.0 in 2011, but could slip in 2012 as milk prices decline next year from this year’s expected highs. The expansion in dairy cow numbers that began last year continues, but will likely crest in the third quarter, with the U.S. dairy herd averaging 9.17 million head in 2011. In 2012, cow numbers are forecast to decrease slightly over the course of the year and average 9.16 million head for the year. Yield per cow is forecast to continue to climb modestly in 2011 above 2010. Output per cow in 2012 is forecast at a higher rate--reflecting the effects of herd freshening that has likely been ongoing since last fall--as the younger cows hit their stride and get an additional milking day next year. The continued increase in milk per cow, to 21,305 pounds this year and 21,685 pounds next year, will more than counterbalance the small reduction in herd size expected in 2012. Milk production is projected to total 195.4 billion pounds in 2011 and to rise to 198.7 billion pounds in 2012.
Milk equivalent imports on a fats basis are forecast at 3.2 billion pounds this year; this represents a downward revision from last month. Although cheese imports appear to be ahead of last year, butterfat and food preparation imports are lagging. Fat basis imports are forecast at 3.0 billion pounds in 2012; high world prices and a relatively weak dollar offer little incentive to import. Milk equivalent imports on a skims-solids basis are projected at 4.3 billion pounds this year and are forecast to slip to 4.1 billion pounds in 2012. In 2012, the same factors affecting fats-based imports contribute to the forecast decline in skims-solids imports.
Commercial exports on a fats basis are expected to reach 7.8 billion pounds in 2011, an upward revision from last month. Total U.S. cheese exports to date are well ahead of 2010. For 2012, strong expected economic growth, especially in emerging and developing markets, should buoy exports, which are forecast at 8.7 billion pounds on a fats basis. Exports on a skims-solids basis are forecast at 31.9 billion pounds in 2011 and 32.3 billion pounds next year. Chinese imports of dry milk products are expected to continue apace for the near future. Although production from Oceania is likely to expand, strong global demand for dairy products will support continued expansion in U.S. dairy exports. Domestic commercial use on a fats basis will rise in 2011, but by less than 1 percent. Domestic use will likely climb in 2012 as continued economic recovery boosts use and milk supplies increase.
Dairy product prices were revised upward from April’s estimates. Butter and nonfat dry milk (NDM) prices remained persistently high in April, in part reflecting continued export strength. Cheese prices have declined from March, but continued domestic demand should support cheese prices during the year. Seasonally higher milk production internationally could pressure dairy prices later in 2011 and into 2012. Cheese prices are expected to average $1.670 to $1.720 per pound this year and decline slightly to $1.595 to $1.695 per pound in 2012. Butter prices are forecast at $1.840 to $1.920 and $1.605 to $1.735 per pound in 2011 and 2012, respectively. NDM prices reflect the robust export outlook for NDM and will likely average $1.480 to $1.520 per pound in 2011 and decline slightly, to average $1.360 to $1.430 per pound in 2012. Whey prices are forecast at 45.0 to 48.0 cents per pound for the current year and 40.5 to 43.5 cents per pound in 2012.
The price outlook for the major dairy products points to continued high milk prices for the balance of 2011, with some decline in 2012. The Class III price is forecast at $16.45 to $16.95 per cwt this year and $15.35 to $16.35 per cwt next year. Class IV prices continue to lead Class III prices, both this year and next, averaging $18.40 to $19.00 per cwt and $16.30 to $17.40 per cwt in 2011 and 2012, respectively. The all milk price is forecast to average $18.95 to $19.45 per cwt in 2011 and $17.35 to $18.35 per cwt in 2012.