Today USDA released its latest World Agricultural Supply and Demand Estimates (WASDE)report.
WASDE stated: “Milk production is forecast higher for 2011 based on higher-than-expected January 1 dairy cow and dairy replacement heifer estimates."
This seems to be an inability to connect the dots in this report. For corn, a primary component of dairy grain mix, WASDE stated:
“U.S. corn ending stocks for 2010/11 are projected 70 million bushels lower this month with higher expected food, seed, and industrial use. Corn used for ethanol is projected 50 million bushels higher on a higher-than-expected November final ethanol production estimate and weekly ethanol data that indicate record output for December and January.”
Corn trading on the Chicago Board of Trade (CBOT) and near or over seven dollars a bushel for all three trading periods. The July 2011 corn price was $7.12 per bushel.
Ethanol futures soared to the highest price since July 2008, March 2011 ethanol futures closed at $2.457 a gallon. One bushel of corn is required to make about 2.75 gallons of ethanol. Recently, in America's cornbelt, the average ethanol distillery has been losing about nine cents per gallon.
So, with grain prices rising with apparently no end in sight, the prediction of increased milk production for 2011 is questionable.