USDA's forecast milk production for 2010 and 2011 was raised from last month in the World Agricultural Supply and Demand Estimates released late last week. Producers continue to add cows to their herds, and the national dairy herd is expected to increase into mid-2011. The rate of growth in milk per cow also is expected to be higher than earlier thought. Fat basis export forecasts for 2010 were raised on strong sales of butterfat and cheese, but 2011 exports were lowered. Skim-solids exports for 2010 and 2011 were forecast higher than last month. Imports were reduced from last month due to higher U.S. production and strong demand in other importing countries. Ending stocks for 2011 were increased as U.S. production is forecast higher.

Strong demand for cheese and tight supplies of butter support higher forecast prices for 2010 and 2011. Stronger demand was forecast to absorb most of the increased production, although prices are expected to be tempered during the latter part of 2011. Price forecasts for nonfat dry milk (NDM) were raised for 2010, but the 2011 forecast was unchanged from last month as increased supplies limit price gains. The whey price forecast was unchanged. Both Class III and Class IV price forecasts for 2010 and 2011 were raised due to the higher product prices. The All-Milk Price was forecast to average $16.25 to $16.45 per hundredweight for 2010 and $15.85 to $16.85 for 2011.