A small ray of sunshine for our country’s dairy farmers – the USDA’s Economic Research Service (ERS) has raised its predictions for milk prices.
In its March “Livestock, Dairy and Poultry Outlook” report, ERS economists write, “As a result of higher cheese and butter prices than forecast earlier, the prices for Class III and Class IV milk have been raised slightly, to $10.05 to $10.65 per pound and $9.50 to $10.20 per pound for 2009.”
Last month, the ERS figured the Class III price would average between $9.70 and $10.40, so the new estimate is 25 to 35 cents higher. Also last month, the ERS said the Class IV price would average between $9.35 and $10.15. That means the new forecast is up by 5 to 15 cents.
Ditto for the U.S. “all-milk” price. In its March statement the ERS looks for that price to average $11.25 to $11.85. That’s an increase of 20 to 30 cents from the February estimate of $10.95 to $11.65.
This latest report is the first in months to state that higher milk prices instead of lower ones n are expected. Make no mistake: Those higher predicted prices are still well below the averages of last year.
Turning to dairy product prices, the ERS says commodity cheese prices should average $1.215 to $1.275 per pound this year. It expects butter prices to average $1.105 to $1.195 per pound.
Nonfat dry milk prices should average 80.5 to 85.5 cents a pound. And, the ERS looks for whey to average 16 to 19 cents per pound. There’s also good news on the demand side. The outlook report says demand for butter and cheese has been “stronger” than expected.
“Lower prices have stimulated additional use. Commercial use is forecast to rise by one percent on a fats basis, and by better than two percent on a skims/solids basis in 2009,” says the report.
On the other hand, exports of milk equivalents are expected to fall to 5.1 million pounds, from 8.8 million pounds last year. The ERS explains that the declines in exports are due to “global recession reducing demand, and to rising production in Australia and New Zealand…”
Looking at production, the report says per-cow output will be up slightly this year. But a contraction in the nation’s “herd” is expected, too. The forecast is for 1.3 percent fewer cows than in 2008. Cow numbers began to fall in January. The economists say the steepest declines will likely come in July and later.
“Output per cow will rise fractionally, to 20,500 pounds…Total milk production will be lower in 2009, at 188.5 billion pounds, a decline from 190 billion pounds in 2008,” says the report.
Feed prices are “moderating,” says the ERS. Still, comparatively weak demand is holding milk prices down.