U.S.D.A. expects dairy product prices to ease in 2008

by Ron Sterk
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WASHINGTON — High milk and dairy product prices and lower-than-expected feed prices should boost milk production enough to limit further price increases this year and ease prices slightly in 2008, the U.S. Department of Agriculture said in its July 20 Livestock, Dairy and Poultry Outlook report (click here to read report).

The U.S.D.A. projected 2007 milk production at 184.3 billion lbs, unchanged from its June projection but up 1.4% from a year ago. Milk production for 2008 was projected at 188.4 billion lbs, up 2.2% from this year.

"Sharply higher milk prices in the current quarter and continued high prices for the balance of the year, combined with more favorable feed prices, will likely lead to higher cow numbers," the U.S.D.A. said.

In its midyear Cattle Inventory report (click here to read report), the U.S.D.A. said the number of milk replacement heifers on July 1 was 3.9 million head, up 3% from a year ago. The increase would indicate producers are building dairy herds.

Domestic demand for dairy products, especially cheese, will keep product prices higher for the balance of 2007, although prices could moderate slightly in 2008, the U.S.D.A. said in its Outlook report. The U.S.D.A. forecast average prices for butter, cheddar cheese and nonfat dry milk to peak in the third quarter of this year and decline slightly in the fourth quarter. It showed dry whey prices already peaking in the second quarter of 2007.

In addition, tight world supplies of dairy products and a weak dollar have boosted export demand for dairy products, especially nonfat dry milk, the U.S.D.A. said.

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