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Things looking “up” for the dairy industry

The monthly Livestock, Dairy and Poultry Outlook from USDA on Wednesday a mixed bag for dairy. The Outlook Board says moderating feed costs and higher milk prices will lead to an end to the decline in milk production although rebounding exports and stronger domestic use should push prices higher throughout the year. The nation’s dairy herd is expected to average just below 9 million head this year compared to 9.2 million cows in 2009. Production per cow is projected to increase 1.9 percent this year thanks in part to the lower-quality cows having been culled throughout 2009. However, the report notes that “while the worst of the economic contraction is over, many producers are not in a financial position to consider herd expansion at this time.”

Milk production is projected to be 188.4 billion pounds in 2010 compared to 189.26 billion in 2009 and the second consecutive yearly decline. Cheese stocks at the end of November were 9.6 billion pounds but the expected decline in milk production and increases in demand should pull those stocks down as the year proceeds. Cheese prices are expected to average $1.57 to $1.65 per pound in 2010 compared to $1.2966 last year. Butter should move from the $1.2096 average for 2009 to between $1.39 and $1.50 this year. As a result, the Class III milk price is expected to average between $14.75 and $15.55 this year, Class IV should run between $14.75 and $15.60 putting the all milk price at $16.20 to $17.00 for 2010 compared to $12.79 in 2009.