Analyst comments: Production in the US is now expanding and this trend is expected to continue as profits at the farm level improve. Dairy commodity prices appear to have peaked and are now easing back but feed prices are falling more quickly. Milk prices typically peaked in late April and have been trending downwards since this time. However the forward pricing curve displayed on the CME for Class III and Class IV milk indicates that prices will not fall significantly before the end of the year. Strong demand in international markets should also assist returns particularly in the states which are more export orientated, such as California. Corn prices have retreated due to the expectation of a much larger crop in the 2013/14 season. World Agriculture Supply and Demand Estimates released by the USDA indicate corn prices will be around US$4.70 per bushel in the coming season. This is significantly below the US$6.90 per bushel estimate for the current season. This will lead to much improved margins at the farm level and allow the US dairy industry to expand. This industry has the ability to expand quite rapidly when it is financially viable to do so.
