Rising Stocks Depress Dairy

WASHINGTON - Feb 8/08 - SNS -- Rising stocks and increasing production potential contributed to lower milk prices during the December, according to the latest outlook from the USDA's World Agricultural Outlook Board.

Forecasts for 2008 milk production are raised as continued growth in cow numbers is expected to more than offset slower growth in output per cow. Producers continue to respond to the strong returns of 2007. USDA's Cattle report indicated that on January 1 dairy cow numbers were 1% higher, and producers expect to retain 3% more heifers.

Heifers expected to calve in 2008 were reported up 3%. Higher production and softer demand is expected to pressure prices and in the face of higher feed prices, herd growth is expected to slow in the latter part of 2008. Stocks on both a fats and skim solids basis are forecast higher as production gains outpace increases in demand.

Both Class III and Class IV price forecasts for 2008 are reduced from last month as a result of lower price forecasts for major dairy products. Weakening international prices, larger milk production, and higher stocks are expected to pressure dairy product prices, particularly nonfat dry milk and whey.

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