Abstract
Summary
Farm level milk prices have improved to $13.80 per cwt in October after
bottoming out at $11.30 per cwt this summer. For the year, the all-milk price
is expected to average $12.51, down 32 percent from 2008. Milk prices are
expected to rebound into the $15 to $16 range through 2013. Slow growth in
domestic demand and much smaller exports this year, have been a reason for the
low prices this year, but prices are trending higher. However, with feed
prices at relatively high levels historically, milk prices will need to
continue to rally to get to profitable levels.
Milk production is projected to be 188.9 billion pounds in 2009, down 0.6
percent from 2008. This will be the first annual decline in milk production
since 1996. The Doane milk production estimate for 2010 is for a decline of
0.8 percent. Milk production for the first half of 2009 was up 0.4 percent
from a year ago (when adjusted for leap year), but slipped to down 0.3 percent
in the third quarter. Fourth-quarter production is expected to be down 1.7
percent. The decline in milk production and cow numbers is coming from the
western U.S. California milk production in September was down 6.4 percent from
a year ago and cow numbers are down 73,000 head. Meanwhile, production and cow
numbers are up in most of the Midwest. Wisconsin production up 5.2 percent in
September compared to last year, and cow numbers are up 5,000 head.
Dairy cow numbers as of September are down 208,000 head from the end of 2008.
The average number of dairy cows this year is projected to be 9.192 million
head, down 1.3 percent from 2008. Cow numbers are expected to be down 2.5
percent in 2010. Poor profitability has sent many producers out of business.
Dairy cow slaughter is up 12.5 percent so far this year compared to last year.
The Cooperatives Working Together (CWT) is currently working on its third
dairy herd buyout. When completed, the program will account for 200,000 head
being sent to slaughter. this year.
Cheese and butter stocks remain above the levels of recent years, but prices
have rallied to the highest level of the year. With milk production slipping
below year-ago levels, milk available for manufacturing has been reduced and
stocks are expected to tighten. Non-fat dry milk stocks are tightening as
improving global demand and concerns about world supplies of dairy products
support prices.
Dairy profitability has improved from historically low levels. The
milk-to-feed ratio jumped above 2 in October for the first time since November
2008. The income over feed costs to produce 100 pounds of milk improved to
$7.04, also the highest level of the year. However, those levels are still
poor historically. The long-term average for the milk-to-feed ratio is 2.74,
and the income-over-feed cost has averaged just over $10 the past decade. Feed
costs are well below the levels of 2008, but remain historically high. Feed
prices are projected to decline slightly in 2010, but milk prices are not
expected to rally enough to prevent contraction in the dairy herd.
Table of Contents
- Summary
- All-Milk Price
- Milk Production
- Cow Numbers and Milk per Cow
- Commercial Disappearance
- Cheese and Butter Prices
- Non-fat Dry Milk and Dry Whey Prices
- Milk-to-Feed Ratio
