Where To Now, Moo-Cow?

Where To Now, Moo-Cow?

Best 2011 milk prices may be past; still better than 2010.

Milk and dairy product prices have been strong into mid-July. But Jim Dunn, Penn State Extension ag economist, expects lower prices for the rest of this year.

June's Pennsylvania all-milk price was $22.80 per hundredweight – up 70 cents from May and $1.30 from April. But the combination of milk futures prices and building inventories of butter, cheese and whey products imply a Pennsylvania all-milk price for the rest of 2011 of $21.77.

For the entire year, the forecasted average is $21.55. That's still $3.27 above the 2010 average price – much better than the comparable months of 2010, points out Dunn.

Milk and dairy product prices have been strong through mid-July.

Despite our own dithering about the debt limit and the budget deficit, Europe's worsening woes are weakening the Euro's value compared to the U.S. greenback. "Europe faces the same challenges we do with too many potential pensioners compared to the workforce, a loss of manufacturing jobs, and inability or unwillingness of the government to reduce entitlements."

That's one reason U.S. dairy exports seem to be weakening, and contributing to the lower milk prices predicted through year-end. Dairy imports should remain weak for the remainder of 2011, which will help milk prices.

Penn State's measure of income over feed costs dropped five cents per cow per day in June to $9.10/. The higher feed costs were due an 82-cent-per-bushel rise in corn prices, plus smaller increases in hay prices. The soybean meal price fell in June.

Nationally, milk production still is growing faster than the milk-drinking population. As long as exports continue to grow, this isn't a problem. But, domestic per capita consumption of dairy products won't increase enough to absorb the extra milk if exports fall. So you know where this will potentially lead.

Retail milk prices have risen 31% over the 11 years. That's slightly less than the overall consumer price index increase of 34%. Farm milk prices have risen by 81% during this period, reflecting that farm milk prices are very high right now.

Catch the full dairy outlook analysis at http://dairyoutlook.aers.psu.edu/.

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