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U.S. Milk Output Rises 2%, Spurred by Higher Prices, USDA Says

U.S. milk production climbed 2 percent in February as rising prices spurred dairy farmers to increase herds and boost per-cow output, according to the Department of Agriculture.

Production climbed to 15.055 billion pounds (6.83 billion kilograms) from 14.758 billion in February 2010, the USDA said today in a report. The dairy herd totaled 9.16 million head last month, up 0.7 percent from a year earlier, while the average cow produced 1,644 pounds of milk, up 1.3 percent, the department said.

“There is a strong underlying desire to get as much milk as possible from each cow with prices rising,” said Bill Brooks, a Kansas City, Kansas-based economist with INTL FCStone. “We should see the growth in milk per cow increase the next three months as new cows are added to the herd and fresh forage supplies become available.”

Class III milk futures reached a 32-month high of $19.65 per 100 pounds on March 11 as domestic dairy-product demand rose and exports of butter and powdered milk increased. Milk for March delivery fell 8 cents, or 0.4 percent, to $19.47 at 12:50 p.m. on the Chicago Mercantile Exchange. Before today, the commodity rose 57 percent in the past year.

The average price farmers will get for all milk this year will be $18.40 per 100 pounds, up from an estimated $16.29 in 2010, the USDA said last week. The price averaged $12.83 in 2009. Production this year will rise 1.7 percent to 196 billion pounds, the government said.

Whole milk at the supermarket averaged $3.357 a gallon (3.8 liters) in February, up 4.8 percent from a year earlier and the highest since January 2009, the Bureau of Labor Statistics said this week.

Average retail cheddar-cheese prices fell 2.3 percent to $5.023 a pound last month, from a record $5.143 in January, government statistics show.

Rising demand from Asia has helped to boost U.S. exports. Dairy-product shipments rose 39 percent to 1.603 million metric tons in 2010 from a year earlier, USDA data show. Cheese exports rose 60 percent to 173,531 tons, and dry milk shipments rose 55 percent to 384,104 tons.

Dairy product exports climbed 49 percent to 138,186 tons in January from 93,043 tons a year earlier, according to the government.

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.

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