Good Times Continue in the Land of Plenty

US - The U.S. Department of Agriculture (USDA) announced last week that it expects many of the same factors that led to record high farm milk and dairy product prices in 2007 to continue to influence the U.S. dairy industry in 2008 and beyond.
calendar icon 27 February 2008
clock icon 2 minute read

Bob Yonkers, IDFA Chief Economist, Ph.D.

According to the International Dairy Foods Association (IDFA, Department officials offered several forward-looking comments at its annual Agricultural Outlook Forum, which included a session on the outlook for dairy products and markets.

Although USDA predicts that high livestock grain and oilseed costs will be a limiting factor for farm milk production in 2008, other factors indicate a more positive outlook. The department anticipates improved pasture conditions and a larger hay crop, and notes that the industry began this year with a record level of dairy heifers, 48 per 100 milk cows. Overall, higher milk cow numbers and somewhat higher output per cow are expected to result in a 2.7% increase in total U.S. farm milk production, leading to a record 190.6 billion pounds in 2008.

As for demand, it is clear that the global dairy market has become a key factor for the U.S. dairy industry. During the Forum, USDA noted that the U.S. dairy industry has become a major commercial exporter of nonfat dry milk, dry whey products and cheese. The U.S Dairy Export Council estimates that exports accounted for 9.5 % of U.S. farm milk solids production in 2007, and a full 98 % of the commercial exports received no export assistance of any kind.

USDA expects farm milk prices to remain relatively high in 2008 and beyond due to the impact of higher feed and fuel costs at the farm level coupled with continued strong global dairy demand. For 2008, USDA expects the all milk price received by farmers to range between $16.85 and $17.55, which would make this price the second highest on record after reaching a high of $19.13 in 2007. Longer term, USDA's baseline forecast expects milk prices to fall slightly in 2009 before steadily increasing to reach over $19 per hundredweight by 2017.

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