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Milk price could rise in 2012 but won’t match the record set this year

The nation’s dairy farms are putting more milk into the pipeline, and consequently, getting paid less for it,  according to Robert Cropp, UW-Madison dairy economist. Milk prices could rebound later next year, as dairy exports strengthen and higher feed prices cause dairy farmers to cut production. But milk producers shouldn’t expect the record prices of 2011, Cropp says in his monthly Situation and Outlook Report.

According to the report, “A growth in milk production well under 2 percent would help to support higher milk prices. USDA estimates milk production to end up 1.6 percent higher for 2011 with another 1.3 percent increase in 2012. If Class III prices do drop well below $17 this winter, with high feed prices increased herd culling, less herd expansions and increased exiting of dairy producers can be anticipated.

This would slow increases in milk production and support higher milk prices. The increase in cow numbers, which increased month-to-month beginning October of last year through August of this year may have already stopped. The estimated 9.209 million head for September was the same as August.

High feed prices will also dampen increases in milk per cow. Unless dairy exports decline significantly, and this is not anticipated, there is a good probability milk prices could strengthen and be higher than what Class III futures are now showing by the second and third quarters of 2012. But, the $20 Class III prices experienced this year are not likely in 2012.”

View the complete October outlook here: