Dairy Co has said the latest milk production forecasts by the US Department of Agriculture (USDA) made in July showed limited changes from the last forecast in December.

2011 milk production forecasts for the EU-27 and the US have been increased slightly from those made in December with higher milk prices cited as the reason.  However, higher input costs particularly for feed remain a major concern; although in the EU-27 higher costs have so far been countered by improved efficiencies.

In contrast, the forecast for New Zealand has been revised downwards but still shows an increase of 5 per cent compared to 2010.  With higher milk production forecast, exports of dairy products by the five major exporters (Argentina, Australia, EU-27, New Zealand and the US) are forecasted to increase in 2011 with the largest increases for SMP (11per cent) and WMP (4per cent) due to strong demand from Asia. 

The US is expected to produce 0.89Mt of SMP in 2011 and export almost half of this, around 414,000t, an 8per cent increase on 2010.  This would make the US the single largest country exporter of SMP for the second year running and only 36,000t less than forecast SMP exports from the whole of the EU-27.

Dairy Co said increasing levels of trade from the US will mean increased competition, which may add pressure to prices. One of the biggest dairy co-operatives in the US, Dairy America will begin selling milk products through the Fonterra auction system from October with SMP the first product to be offered. The uncertain global economic outlook is also likely to mean prices remain volatile.  However, strong WMP demand from China and higher feed costs which may impact supply, suggests that the outlook is still largely positive.