Wisconsin Ag Connection - Cropp: Milk Prices Will Keep Rising with Less Cows, Production

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Cropp: Milk Prices Will Keep Rising with Less Cows, Production
Wisconsin Ag Connection - 12/29/2009

Earlier this year, dairy marketing experts said national milk production would need to fall in order for the industry to recover from devastating milk prices. And according to Dr. Bob Cropp, professor emeritus with the University of Wisconsin Cooperative Extension, that's exactly what's happening. In his monthly Dairy Situation and Outlook report, Cropp noted that the latest production estimates for U.S. milk output for November are one percent lower than a year ago. This is the fourth consecutive month that production was below year-ago levels, as cow numbers were also down by 2.6-percent from the previous year.

"The majority of the decline in cow numbers and milk production continues in the West," Cropp said. "Compared to a year ago November cow numbers were down 10.6-percent in Arizona, 10.8-percent in Colorado, 5.7-percent in New Mexico, 4.3-percent in California, 4.0-percent in Texas and 1.4-percent in Idaho."

The USDA cites poor returns over feed costs as the main factor impacting milk per cow in some Western states. And Northeastern states like New York, Pennsylvania and Vermont are also reporting lower cow numbers.

Meanwhile, with the holidays now behind us, Cropp says we may not see an increase in January milk prices.

"But, beyond January with a continued decline in milk production from a year ago and some signs of perhaps improvement in domestic sales, especially cheese, and anticipated further improvement in dairy exports, milk prices will continue to improve in 2010."

He says higher dairy product prices means much improved farm milk prices. The December Class III price will be near $14.85, up almost $4.90 from the yearly low of $9.97 for both June and July. For the year, the Class III price will average about $11.30, down about $6.15 from the $17.44 average last year. The U.S. All Milk Price will be near $16.00 for December, about $4.70 higher than the yearly low of $11.30 for both June and July. For the year the All Milk Price will average near $12.75, about $5.55 lower than the $18.29 average last year.