Lower milk prices and feed costs are forecast, but the lower costs won't make up for the lower prices.

In yesterday's World Supply/Demand Estimates, USDA lowered its milk price forecasts sharply from a month earlier. The midpoint projection for 2010 Class III prices was lowered from $15.25 to $14.50. The midpoint of the All-Milk Price projection was lowered from $16.55 to $15.85 or 70 cents per hundred.

The milk production forecast was raised for 2010 with milk production expected to be fractionally above 2009.

Cheese prices were reduced as higher stocks are expected to pressure prices. Butter price forecasts were raised slightly on the strength of current demand although higher milk supplies and weaker cheese prices may encourage higher butter production, pressuring prices later in the year.

The projected 2009/10 marketing-year average farm price for corn was lowered 20 cents on the top end of the range to $3.45 to $3.75 per bushel. World corn production for 2009/10 was raised 5.9 million tons. Global corn ending stocks for 2009/10 were projected to be 6.1 million tons higher with increases in most of the world's major corn-exporting countries, including the U.S., Argentina, South Africa, and Brazil.

The U.S. season-average soybean price range for 2009/10 was narrowed to $8.95 to $9.95 per bushel. The soybean meal price was projected at $280 to $310 per short ton (2,000 pounds) compared with $270 to $320 previously.

U.S. soybean ending stocks for 2009/10 are projected at 190 million bushels, down 20 million from last month. Soybean production is estimated at 3.359 billion bushels, down 2 million from the January estimate.

Cattle price forecasts were raised for 2010 due to tighter meat supplies. This will provide more cull cow income and encourage culling which will help reduce milk supplies.

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