September 25, 2007

Demand, prices for US milk to remain strong next year

The strong demand for milk in the US, especially from abroad, will likely keep prices from falling sharply, according to a report from the Economic Research Service (ERS) of the US Department of Agriculture.

The report said US milk production rose this summer -- with California dairies leading the way -- at a time when production usually eases.

"Domestic demand for dairy products, especially cheese, combined with global demand and tight world supplies, will keep milk and dairy product prices high this year and next. The upturn in milk production will moderate 2008 prices somewhat compared with 2007," the report says.

The USDA analysis says a month-by-month comparison of 2007 with 2006 prior to July shows increases of less than 2 percent per month but the July and August data "clearly represented a break with trend and the typical seasonal pattern in which production declines through the summer into the fall."

It says there was a substantial increase in milk production in California ¨C 4.9 percent.

It credits the increase to both increased numbers of cows and increased production per animal. The report says high prices for both dairy cows and replacements indicate strong demand for animals and herd expansion.

Globally, milk supplies remain tight relative to demand. Rising real incomes in Asia, especially in China, have boosted demand for nonfat dry milk and other dry milk products, says the report. Meanwhile, supplies are growing at a glacial pace, it added.