Milk production for 2012 is forecast to climb as the decline in milk cows is expected to be offset by growth in milk per cow, according to USDA's World Supply and Demand Estimates released yesterday. Although dairy product inventories are expected to expand this year, weakening milk prices and relatively high feed costs will set the stage for the U.S. dairy herd to shrink slightly. Exports are forecast to rise as the global economy improves. Imports should be lower. With increasing domestic production, cheese, butter, nonfat dry milk, and whey prices are forecast lower.

USDA predicts lower prices for both Class III and Class IV milk due to the lower product prices. The all-milk price is forecast at $17.35 to $18.35 per hundredweight for 2012.

The milk production forecast for 2011 is lowered from last month primarily reflecting slower growth in milk per cow despite more rapid growth in cow numbers. Imports are reduced, and exports are raised from last month due to greater global dairy demand and a weak U.S. dollar.

All dairy product prices are raised from last month's forecast with class prices raised to reflect higher product prices. The milk price is forecast to average $18.95 to $19.45 for this year.

On the cull cow side of the ledger, declines in cattle inventories will diminish the pool of cattle available for placement during 2012 which, in turn, will reduce the number of fed cattle available for slaughter. This should bolster cow prices.

Corn production for 2011/12 is projected at a record 13.5 billion bushels, up 1.1 billion from 2010/11, according to the report. This results from a 4.0-million-acre boost in intended plantings and a recovery from last year's weather-reduced yields. The 2011/12 corn yield is projected at 158.7 bushels per acre, 3.0 bushels below the 1990-to-2010 trend reflecting the slow pace of planting progress through early May. The 2011/12 yield is expected to be the third highest on record.

Corn supplies for 2011/12 are projected at 14.3 billion bushels. This is below the 2009/10 record of 14.8 billion bushels, but up 75 million from 2010/11, as a 5-million-bushel rise in 2010/11 imports and a 50-million-bushel reduction in 2010/11 exports boost current year carryout forecast this month.

Total U.S. corn use for 2011/12 is projected down 1 percent from 2010/11.

Corn use for ethanol is projected up 50 million bushels reflecting slow expected growth in gasoline consumption and continued export demand for ethanol in the coming year. Domestic corn feed and residual use is projected at 50 million bushels lower than in 2010/11 reflecting increased availability of feed by-products from ethanol production and lower expected residual use as compared with the current year. U.S. corn exports for 2011/12 are projected down 100 million bushels from 2010/11 with larger foreign corn supplies. U.S. corn ending stocks for 2011/12 are projected at 900 million bushels, up 170 million from the current-year projection. Stocks remain historically tight with stocks-to-use projected at 6.7 percent compared with the current year projection of 5.4 percent. The season-average farm price is projected at a record $5.50 to $6.50 per bushel compared with the 2010/11 forecast of $5.10 to $5.40 per bushel.