High Prices to Pull Milk Output Higher

WASHINGTON - Oct 12/07 - SNS -- High dairy prices will result in an increase in milk production totals for the United States through the end of 2008, according to the latest supply and demand forecasts from the USDA's World Agricultural Outlook Board.

"Producers continue to respond to high milk prices with high replacement heifer and calf prices pointing to continued expansion plans," the USDA said. "Milk per cow growth into 2008 is expected to be moderated by tight supplies of alfalfa hay and relatively high feed prices."

Stocks, both on a fat and skim-solids basis, are forecast higher than last month reflecting increased supplies of butter and stocks of nonfat dry milk (NDM). Although NDM stocks are expected to dissipate somewhat as product moves into export channels, increased production of dairy products in 2008 likely will result in somewhat higher fat and skim-solids basis stocks than forecast last month.

Higher milk production is expected to pressure prices despite relatively robust demand. Cheese, butter, and whey prices are reduced as supplies are expected to build. NDM prices should remain relatively strong despite increased production as world supplies are expected to remain tight through much of 2008. Dry whey prices are lowered as prices have dropped significantly.

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