The USDA raised its milk production estimate in its latest World Agricultural Supply and Demand Estimates report after reducing it slightly in the August issue. The Sept. 12 report says the dairy herd has been expanding at a more rapid rate than expected. However, the 2012 forecast was reduced as higher forecast feed prices will reduce the rate of growth in milk per cow. 

Look for 2011 output to hit 195.7 billion pounds, up 100 million pounds from the August projection. That compares 192.8 billion pounds in 2010. The 2012 estimate is 198.5 billion pounds, down 300 million from last month’s estimate.

Commercial exports for 2011 were raised on the strength of current product exports. 2012 fat basis exports were lowered, largely on slightly weaker butter exports. Skim solids imports were raised for both 2011 and 2012.

Cheese prices for 2011 were forecast lower, but nonfat dry milk (NDM) and whey was forecast higher on the strength of relatively strong exports. Butter prices were unchanged. 

The Federal order Class III milk price estimate was lowered, based on the lower forecast cheese price, but the Class IV price forecast was unchanged from last month. Look for a 2011 Class III average of $18.25-$18.45 per hundredweight, down from $18.40-$18.60 expected a month ago. The 2010 average was $14.41. The 2011 Class IV price remained at $19.05-$19.35, up from $15.09 in 2010.

Butter and cheese prices for 2012 were unchanged from last month’s report but NDM and whey prices were forecast higher. The 2012 Class III price forecast was unchanged from a month ago, at $16.10-$17.10, but the Class IV forecast was raised to $16.50-$17.60, up a nickel. The 2011 all milk price forecast was lowered to $20.15-$20.35 but was unchanged at $17.80-$18.80 for 2012. 

The report showed U.S. corn production at 12.497 billion bushels, down 417 million from the August estimate. Expected yields are down across most of the Corn Belt, with an expected average of 148.1 bushels per acre, down from the August forecast of 153 bushels per acre. 

The soybean forecast, at 3.085 billion bushels, was up from the 3.056 billion projected in August. The higher prices are expected to curb exports and domestic use, according to USDA. 

Some suggest that the corn situation is such that there may be rationing in 2012, reported Dairy Profit Weekly Editor Dave Natzke in Friday’s DairyLine. Drought-parched fields in the Southwest and storm-damaged crops in the Northeast are driving the concern over the supplies and price of livestock feed, he said, and was a subject of interest on Capitol Hill. 

Natzke said that feed supplies and prices were a dominant theme this week, as we head into the fall harvest, starting with USDA’s Crop Production and World Ag Supply & Demand Estimates reports, and culminated with a House Livestock, Dairy and Poultry subcommittee hearing to examine feed availability and its effect on the nation’s livestock producers. 

“Much of the concern centered on corn,” Natzke reported, and he pointed to USDA’s lowered harvest estimate, citing summer weather conditions that reduced expected yields to the lowest average since 2005. He added that this is the largest area planted to corn since 1944, but “the resulting harvest compared to expected use will leave the corn supplies at their lowest levels since 2006,” and based on those projections USDA said season-average corn prices would range $6.50-$6.70 per bushel.

“The feed situation has prompted suggestions corn rationing may be needed in 2012, and calls for changes in everything from U.S. energy policy regarding corn used in ethanol production and land-use policies to changes in dairy policy to help farmers manage milk-feed price margins,” Natzke warned.

Increasing feed prices in relation to milk prices could also impact the federal budget. Projections from National Milk’s Roger Cryan indicate federal payments to dairy farmers through the Milk Income Loss Contract program could be triggered as early as November and run through the end of fiscal year 2012.

“Feed, and resulting human food supplies may even be impacting consumer opinions,” Natzke concluded. A consumer study by the Center for Food Integrity found 40 percent of consumers surveyed said U.S. farmers should not be responsible for addressing global hunger, but rather that it was more important to teach developing nations how to feed themselves.”

“Sharply higher feed prices for the balance of 2011 and into 2012 and lower forecast milk and dairy product prices next year will lead to a slight retrenchment in cow numbers,” according to the latest Livestock, Dairy, and Poultry Outlook. However, production per cow and milk production are expected to continue to rise both this year and next, according to USDA.

Cow numbers are projected at 9.2 million head this year, and output per cow was raised slightly from last month to 21,280 pounds for the year. The U.S. dairy herd in 2012 is expected to decline slightly to 9.19 million head, with most of the contraction coming in the second half of the year. With an additional milking day in 2012, milk per cow is forecast to climb by 1.5 percent to 21,605 thousand pounds. Although milk production and output per cow will be higher next year compared with 2011, the September forecast represents a downward revision from August estimates.

Meanwhile, USDA says milk production varies throughout the U.S. dairies in the Southeast and Southwest, where high daytime temperatures have been in place for an extended period, note production is slipping. Most northern tier states indicate cow comfort has helped production rebound from the summer doldrums. 

Milk haulers in the Northeast are logging extra miles and hours to reach farms along routes where roadbeds were damaged by Hurricane Irene and, with the arrival of rainstorms from Tropical Storm Lee, some dairy plants reported water damage and operational disruptions. The full impact on dairy operations of wind, rain, wildfires and drought has yet to be tallied. 

Dairy-quality forage availability is tight in some areas. Some operations with corn in the fields are debating whether to harvest corn for grain or silage, according to USDA, and milk processors reported bottled milk demand in the Labor Day week was steady to higher. Manufacturing capacity was adequate within most areas. 

Readers with questions or comments for Lee Mielke may write to him in care of this publication.