Sunday, December 09, 2018
 More Milk & Weakening Global Demand Lower Price Forecast  
Falling feed costs, which are likely to continue into 2009, will provide little relief for dairy producers. Milk prices are also declining and are expected to continue to do so into next year. Current USDA forecasts place the season-average corn price between $3.65 to $4.35 per bushel and the average soybean meal prices at $240 to $300 per ton in 2009. Falling milk prices leave the milk feed price ratio at a projected 1.9 for 2009. A ratio in this range suggests continued pressure for contraction. Cow numbers are forecast to decline slightly to 9,245 thousand head. However, yields are forecast to rise about 1 percent to 20,700 pounds per cow, an increase well below trend. This small yield increase is sufficient to nudge milk production to 191.4 billion pounds in 2009, a below-trend increase of less than 1 percent. In the face of weakening demand, domestically and especially internationally, milk and dairy product prices will continue to glide downward throughout much of 2009.
September commercial disappearance, all products milk equivalent fat basis, is up from a year earlier by 2.7 percent. Butter had the largest upturn on a percentage basis. 2008 production continues to outpace last year's for the major products. Commercial use on a fats basis is expected to climb in 2009 by about 2 percent, which is about trend. What has changed the price outlook is softening export sales. Global dairy demand has been weakened by recession, and supplies of products from the United States, the European Union and the Oceania countries remain ample. Trade data are reflecting the fundamentals. In October cheese exports fell for the second straight month, with exports as a percentage of production falling to 2.5 percent, the lowest share thus far in 2008.
The stronger dollar has also disadvantaged US producers. The outlook is for continued weakening exports into 2009, especially for dry products. Exports on a skims solids basis are forecast at 23.5 billion pounds, the lowest since 2005. On a fats basis, exports are forecast to slide to 6.7 billion pounds, well below 2008's projected 9.1 billion-pound total. Butter exports held steady at low levels not seen since early 2008 and down about 25 percent from the levels that prevailed through August. Nonfat dry milk (NDM) exports have fallen to the lowest level of the year, and to a near-record low as a percentage of production. Weaker exports next year, along with slightly higher milk production, will soften prices across all products and milk classes. Prices for the major dairy products have trended downward through November.
Prices for the major dairy products are forecast to decline in 2009. Cheese prices are forecast to average $1.655 to $1.735 per pound next year, a decline from 2008's projected average of $1.890 to $1.900 per pound. Butter prices are expected to average $1.265 to $1.375 per pound next year compared with $1.420 to 1.450 this year. The price declines for dry products are expected to be steeper, with NDM prices falling to 87.5 to 93.5 cents per pound in 2009, a substantial drop from an average $1.215 to $1.235 per pound this year. Dry whey prices are forecast to average between 19.0 to 22.0 cents per pound in 2009, down from 24.5 to 22.5 cents a pound this year.
Lower product prices will lead to lower milk prices in 2009. The forecast Class III price is expected to slide to $14.50 to $15.30 per cwt from an average $17.40 to $17.50 per cwt this year. The Class IV prices are forecast to decline even more sharply next year to average between $10.75 and $11.65 per cwt, down from $14.55 to $14.95 projected for 2008. The all milk prices are expected to fall to between $14.95 to $15.75 per cwt next year, a drop from 2008's expected $18.30 to $18.40 per cwt.
Source: Livestock, Dairy, and Poultry Outlook, USDA

Posted on Saturday, December 20, 2008 (Archive on Saturday, December 27, 2008)
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