Feed prices appear to be moderating slightly from last year’s highs. Corn is forecast to average $3.95 – $4.15 per bushel in the 2008/09 crop year and $3.35 – $4.15 for the next crop year. Soybean meal prices will average slightly below the previous year in 2008/09 and are forecast lower in 2009/10. Feed prices, however, will remain above the 5-year average for both corn and soybeans. Forage prices will likely follow grain prices moderating into 2010. While welcome, lower feed prices alone will not restore producer profitability. Recession-reduced demand weakness will keep dairy product prices below year-earlier levels for the balance of 2009.

The result is continued pressure to remove cows from production. The Cooperatives Working Together (CWT) program is expected to remove about 101,000 cows from the herd by the end of July.1 The U.S dairy herd is expected to contract 1.5 percent in 2009 from 2008 and another 2.6 percent contraction is expected in 2010. Yet some of the decline in cow numbers is offset by continued gains in milk per cow. In 2009, milk per cow per day increased 1 percent and is forecast to climb nearly 2 percent in 2010. Milk production this year is projected at 187.6 billion pounds, unchanged from last month’s forecast and next year’s production is forecast at 186.4 billion pounds. This leisurely decline is encountering a recession-weakened domestic market.

Exports both this year and next, with the exception of whey, are likely to be well below the totals for the last two years, and are forecast at 3.8 billion pounds of milk equivalent, fat basis, in 2009 and 3.9 billion pounds in 2010. Whey exports, mostly to Mexico and China, have made the skims/solids exports numbers appear stronger. Those exports are forecast to total 19.9 billion pounds this year and 23.1 billion pounds next year.

Product prices will likely remain low in 2009. Cheese prices are projected to average $1.210 – $1.2402 per pound; butter prices are expected to average $1.175 – $1.235 per pound. The outlook for dry products is also for low prices for the year with nonfat dry milk (NDM) averaging 82.5 – 85.5 cents per pound and whey averaging 24 – 26 cents per pound. Prices are expected to recover in 2010 but not to their previous levels. Cheese prices are forecast to average $1.530 – $1.630 per pound in 2010. Butter prices are forecast to stage the strongest recovery and average $1.435 – $1.565 per pound for the year. NDM prices are expected to average $0.990 – $1.060 per pound for the year and whey 28 to 31 cents per pound next year.