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Milk Prices Projected to be Decent, Despite Record Production
Wisconsin Ag Connection - 02/25/2011

The USDA has confirmed this week that Wisconsin dairy farmers have produced a record 26 billion pounds of milk in 2010, which is about three percent higher than the year before. Statewide, milk per cow averaged 20,630 pounds--551 pounds more than a year earlier. The state's herd averaged 1.26 million milk cows throughout the year and help Wisconsin account for 14 percent of the nation's total milk production.

Meanwhile, Dr. Bob Cropp, professor emeritus with the University of Wisconsin-Extension, says the common trend of 'higher production means lower prices' are starting to see some exceptions. In his monthly Dairy Situation and Outlook report, he notes that world stocks of butter and milk powders are currently tight, causing a bump in prices paid to producers. He says high world feed prices are also likely to slow the growth in world milk output; and that Australia and New Zealand have scaled back anticipated milk production for the year due to adverse weather that has impacted pasture conditions.

"This price pattern is the opposite of what was forecasted back in early January. It was then assumed that it would take the first half of the year to slow down the growth in milk production as dairy producers slowly adjust cow numbers and milk per cow slows in response to much higher feed prices," Cropp said. "But, it now looks like the opposite will occur with prices averaging higher for the first half of the year than the second half, and with averages for the year much improved over 2010."

The January Class III was $13.48 and will be near $17 for February. As of last week, Class III futures settled at $18.51 for March, above $17 through September and down to $16.44 for December. The January Class IV was $16.42 and will be near $18.40 for February.

Nationally, 193 billion pounds of milk were produced in 2010, up two percent from 2009. Average milk per cow grew to 21,149, up 576 pounds from the previous year. The number of milk cows in the U.S. decreased in 2010. There were 9.12 million cows, 86,000 fewer than in the previous year.

California continued to be the nation's top milk producer with 40.4 billion pounds in 2010. Wisconsin was second with 26 billion pounds. Idaho passed New York to take over third place with 12.8 billion pounds. New York moved into fourth place with 12.7 billion pounds, and Pennsylvania remained in fifth place with 10.7 billion pounds of milk.

The average number of dairy farms licensed to sell milk in Wisconsin during 2010 was 12,710, down 460 from the previous year. The U.S. total was 53,127 licensed dairy herds, a loss of 1,805 herds.

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