USDA: Milk prices softer in 2005

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WASHINGTON – Dairy markets in 2005 will be greatly affected by how long 2004 prices remain at record levels.

After low milk prices in both 2002 and 2003 and the peculiar set of circumstances leading to this year’s price recovery, farmers likely will be reluctant to start planning expansions.

More farmers leaving? Similarly, weaker producers may see any significant price decrease as a sign to leave dairying, particularly given the scheduled end of the Milk Income Loss Contracts at the end of September 2005.

A few months of high prices in 2004 probably would not alter the pattern of milk cow numbers much, particularly when dairy replacement supplies are tight, according to the USDA’s May 2004 outlook report.

On the other hand, an extended period of strong prices would tend to be viewed as a harbinger of more lasting price recovery.

Milk cow numbers are expected to continue to decline in 2005 but at a slower rate than in 2004.

More milk per cow. Milk per cow should post a relatively large increase in 2005, according to the USDA’s report.

The presumed return of normal availability of bovine somatotropin should quickly be seen in milk per cow gains.

Also, concentrate feed prices are projected to be somewhat lower than this year, leaving milk-feed price ratios no worse than slightly unfavorable.

Milk production is projected to rise 1 percent to 2 percent from 2004 on a daily average basis.

Demand stays strong. Even though there may be some negative carryover from 2004’s soaring prices, demand in 2005 is expected to be fairly strong.

Economic prospects are generally favorable, and consumer spending seems to be shifting back to stronger food expenditures, the USDA reports.

In addition, some commercial exports of nonfat dry milk are possible, at least in the first half.

Farm milk prices are expected to average $13-$14 per hundredweight in 2005, down sharply from this year but considerably higher than the low prices of 2002 and 2003.

If this year’s jump in cheese demand proves larger than now seen, the decrease in 2005 farm milk prices could easily be considerably smaller.

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