U.S. Milk Output Increases as Higher Prices Spur Productivity

U.S. milk output increased 1.3 percent in May, the Department of Agriculture said, as climbing prices spurred farmers to increase productivity.

Production rose to 17.27 billion pounds from 17.04 billion in May 2010, the USDA said today in a report. The dairy herd totaled 9.2 million head last month, up 0.9 percent from a year earlier, while the average cow produced 1,877 pounds of milk, up 0.4 percent.

“Relative to last year, we’re still looking at more milk per cow and more cow numbers,” Bill Brooks, an economist with INTL FCStone, said before the report. Farmers are “trying to maximize their facilities.”

Class III milk futures reached a 35-month high of $20.27 per 100 pounds on June 6 amid climbing demand for U.S. dairy products. The July contract fell 5 cents, or 0.2 percent, to $20.04 at 12:59 p.m. on the Chicago Mercantile Exchange. Before today, the commodity rose 48 percent in the past year.

A cool, wet spring in parts of the U.S. has delayed pasture growth in some areas and is “negatively impacting the feed quality that cows are getting,” Brooks said. This could limit the growth per-cow output going forward, he said.

The average price farmers will get for all milk this year will be $19.85 per 100 pounds, up from an estimated $16.29 in 2010, the USDA said last week. Output in 2011 will climb to an all-time high of 195.5 billion pounds, up from last year’s record of 192.8 billion, the government forecast. Production will continue to jump in 2012 to 198.5 billion pounds, according to the USDA.

Rising overseas demand for U.S. dairy products is boosting exports. Dairy-product shipments rose 38 percent to 429,229 tons in the first quarter of 2011 from a year earlier, with Mexico, China and Canada as the biggest buyers, the USDA said.

To contact the reporter on this story: {Elizabeth Campbell} in Chicago at ecampbell14@bloomberg.net

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

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