Low Milk Prices Should Prompt Herd Reduction

US - The continued outlook for relatively high feed prices and forecast lower milk prices in 2012 compared with last year will weaken returns for dairy producers over the course of 2012, leading to herd reduction, according to the February USDA Livestock, Dairy and Poultry Outlook.
calendar icon 17 February 2012
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The January Cattle report showed a 1 percent higher inventory of dairy cows on farms than a year earlier. However, the number of heifers for milk cow replacement and the number of heifers expected to calve in 2012 were both reported 1 percent below a year earlier.

Cheese prices are forecast at $1.610 to $1.680 per pound; this represents a reduction from January’s estimate and is well below the $1.825 per pound price posted last year.

Similarly for butter, prices were projected lower at $1.570 to $1.670 per pound, representing a downward revision from January and a sharp drop from 2011’s average price of $1.950 a pound. The same market fundamentals apply for both butter and cheese, with higher production overtaking demand.

Nonfat dry milk (NDM) prices were revised downward in February as well. NDM is forecast at $1.360 to $1.420 per pound. The sharpest declines in cheese, butter and NDM prices will occur in the first quarter.

Export demand should support some recovery in product prices as the year goes on, but prices for cheese, butter and NDM are not expected to recover to 2011 levels.

The whey price forecast was raised from January to 61.5 to 64.5 cents a pound and is well above the 2011 average price of 53.3 cents a pound. The pace of whey exports has kept prices moving upward for the last 3 years, a situation expected to continue in 2012.

TheCattleSite News Desk

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