Milk Prices

According to the December USDA Dairy Outlook, "Milk production in the last quarter of 2005 is expected to remain more than 4 percent larger than a year earlier, bringing annual output almost 4 percent higher than 2004 on a daily average basis. The increase in the 2005 total will be the largest in two decades. Milk cows will average fractionally larger than 2004, while the rise in daily average milk per cow will exceed 3 percent. Another fractional rise in milk cows is projected to combine with about a 2-percent jump in milk per cow to boost 2006 milk production almost 3 percent.

The modest growth in 2006 cow numbers is expected to be significantly constrained by tightness in replacement markets and the increasingly ponderous approval process for new or expanded dairy farms. However, the returns of recent years probably provided enough impetus for a significantly faster rise in cow numbers. If new operations can be brought on line faster than expected, increases in milk cow numbers and milk production could be considerably larger than projected, particularly during the second half."