Oct. 13 2011 09:11 AM

Dairy prices for October forecasted lower than September but stay above 2010 levels. Beef production remains strong.

The milk production forecast for the remainder of 2011 has been raised. September production is slated to end around 195.7 billion pounds this year, with production in October projected to rise 2 million pounds, coming in around 195.9 billion pounds. For the same time period in 2012, though, the USDA, in its World Agricultural Supply and Demand Estimates report, is predicting a 2.6-billion-pound addition to U.S. milk production. As of yesterday, estimates were 198.5 billion pounds and 198.4 billion pounds for September and October of 2012, respectively.

Forecast for 2011 milk production rose since the U.S. dairy herd has been expanding at a rapid rate, and milk per cow during the summer months spiked more rapidly than initially expected. While 2012 production is expected to be 2.6 billion pounds higher than 2011, the production forecast has dropped since September's report. This decline is expected to occur with lower milk price forecasts, a weakening milk-to-feed ratio hasten the declines in cow numbers.

Dairy products and prices forecasted lower
Fat basis exports are forecasted lower for 2011 based on weaker butter and cheese export, but remain unchanged going into 2012. Skim solids exports remain the same for 2011 but have declined for 2012. Import forecasts remain the same.

Butter and cheese prices for the remainder of October have declined due to pressure from weaker international prices. Butter and cheese have also taken a hit in the 2012 estimates. Concurrently, nonfat dry milk (NDM) for 2011 is unchanged but has seen a future drop due to a weakening international market. Whey price forecasts, on the other hand, have risen for both 2011 and 2012 due to a strong demand.

Class III price has also taken a hit in 2011. Higher whey prices in 2012, though, have offset the lowered cheese price, allowing for an elevated 2012 forecast. Class IV prices, in response to the drop in butter and NDM, have been lowered for both years, as well. The all milk price for 2012 is forecasted at $17.75 to $18.65 per hundredweight for 2012.

Beef production remains high
Due to the higher expected cattle slaughter as drought conditions persist in the Southern Plains, in conjunction with high hay prices, forecasts for beef production have risen for 2011. Production for 2012 has declined from last month.

Beef imports are lowered as a strong demand for beef by competing importers limits shipments to the U.S. The export forecast, though, has risen as the demand in many countries is predicted to support continued growth of the U.S. beef export market.