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Cropp: Dairy Farmers Should Watch Output & Exports in 2012
Wisconsin Ag Connection - 12/22/2011

The price of milk paid to dairy producers in 2012 depends heavily upon two things: the level of milk production and the level of dairy exports. That's according to Dr. Bob Cropp, professor emeritus with the University of Wisconsin-Extension. In his monthly Dairy Situation and Outlook report, he says lower milk prices for the start of the year, along with relatively high feed cost, could halt the increase in cow numbers and dampen increases in milk per cow.

"USDA's outlook report for November milk production showed cow numbers declined only slightly for the past two months, down 4,000 head from September, but still 1.0% more than a year ago," Cropp said. "Compared to a year ago, November milk production was 2.2% higher for the 23 reporting states and estimated 1.8% higher for the U.S. The increase in milk per cow continued to run below normal trend, at just 0.8%.

He says the boost in milk production continued to be attributed to western states--many of which had more milk cows than a year ago. In the midwest, production was also up in Iowa and Wisconsin, but down slightly in Minnesota.

"USDA expects dairy exports to decline some, especially for cheese and butter, but yet remain favorable," the report noted. "If this holds and milk production slows milk prices could well improve the second half of 2012, but are likely to still average below 2011 for the year."

Meanwhile, Cropp says the wholesale price of dairy products often decline seasonally starting the end of November into December, especially for butter and cheese. He said cheese prices may well recover some by mid-January and February, but the Class III price for first quarter of 2012 could average near $16.75 per hundredweight.

"Also with lower nonfat dry milk prices dry whey prices will likely show some weakness," Cropp said. "Some forecast lower Class III prices, but total cheese stocks have improved with October 31 stocks being 4.3% lower than a year ago."

October cheddar cheese production was 5.8% below a year ago and total cheese production just 1.7% higher. Cheese exports continue to be favorable with October exports 22% higher than a year ago and up 31% for the year.

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