Cow numbers and milk production may not drop as much this year as expected earlier, according to USDA's dairy outlook report released yesterday. The size of the U.S. dairy herd is expected to decline from an average of 9.2 million head in 2009 to an average of 9.015 million this year.

The big heifer inventory suggests that the decline in herd size will be more gradual than earlier forecast. Milk per cow is forecast to increase 1.8 percent this year, to 20,950 pounds from 20,576 pounds last year. Feed prices will decline as the price of corn is expected to average $3.45 to $3.95 per bushel in the 2009/10 marketing year and soybean meal is forecast to average $270 to $320 per ton.

These forecast prices represent substantial declines from $4.20 per bushel for corn and $336 per ton for soybean meal posted for 2008/09. The resulting Milk-Feed Price ratio's will not be enough to create expansion, but they could limit the rate of decline in milk production.

Year-ending stocks in 2009 were about 12 percent higher on a milk equivalent fat basis than at the end of 2008, mostly due to especially high cheese stocks. On a milk equivalent skim-solid basis, stocks were about 3 percent higher. USDA forecasts dairy product exports to rise substantially in 2010 compared with 2009's depressed levels.

Exports are projected to increase from 4.0 to 4.8 billion pounds on a milk equivalent fat basis and from 22.7 to 25.7 billion pounds on a milk equivalent skim-solid basis. Domestic commercial use, on a skim-solid basis, is forecast to increase to 168.3 billion pounds in 2010 from 166.4 billion in 2009 and to rise to 188.8 billion pounds from 186.2 billion on a fat basis.

Commercial use rose in 2009, mostly due to low prices, but the commercial use forecast this year will hinge more on the strength of economic recovery in light of higher expected prices. Cheese prices are forecast higher in 2010, at $1.575 to $1.645 per pound. Likewise, butter prices will strengthen in 2010 averaging $1.395 to $1.495 per pound.

Prices for dry products will also rise this year. NDM prices are forecast to average $1.175 to $1.235 per pound and whey to average 37.5 to 40.5 cents per pound in 2010. Based on product price forecasts, milk prices will rise in 2010 from those of 2009. The Class IV price is expected to be $13.95 to $14.75 per cwt, and the Class III price is projected to average $14.90 to $15.60 per cwt.

The all milk price is expected to be $16.20 to 16.90 per cwt in 2010. For more information on this publication, click here.