USDA projects higher prices in 2007
In their recently released Livestock, Dairy, and Poultry Outlook, USDA economists say “Continued strong demand for dairy products, both international and domestic, will combine with marginally higher 2007 production to boost prices.” Though milk-per-cow levels are expected to show increases of 1.4% over 2006 levels, the dairy herd is projected to decline by 65,000 head. These forces combined are projected to result in a minor 0.6% increase in overall milk production. USDA expects global supplies to remain tight, helping boost domestic milk prices.
Based on these projections, the USDA forecasts were bumped up from last month’s estimates. Federal order Class III prices are forecast to average $13.15 per hundredweight and the U.S. all milk price is expected to average $14.10 per hundredweight?with the highest prices expected in the first and third quarters of 2007. Using historical differences between federal order prices and those in California, the following California mailbox estimates (i.e., prices that reflect adjustments up and down to estimate the price actually received by dairy producers) are derived for next year: $12.81 cwt for the 1st quarter; $12.31 cwt for the 2nd quarter; $12.96 for the 3rd quarter; and an annual average of $12.86. Since September, USDA has increased their 2007 projections each month.