Milk price may jump by 2010

WASHINGTON — Dairy farmers who can hang on through the next few months may see a reward down the line: sharply higher milk prices in 2010.

That is a prediction from some economists, who envision prices rising from around $13 per 100 pounds now to around $20 next year — enough, perhaps, for dairy farmers to get out of the red after this year's historic plunge.

Whether $20 milk is enough to make a profit is a matter of debate among dairy farmers, but the predictions clearly show that the extreme pain of low milk prices will be relatively brief. Based on milk futures prices, milk used in beverages could climb to $17 by September, or enough to stop government subsidies that are paid to farmers when prices are low.

Prices could reach $18 by November, then break $20 in September 2010. That is about the same level milk prices reached before the latest crash in February.

Those projections came from the National Milk Producers Federation, which represents farmer-owned bargaining cooperatives. Not everyone is as optimistic; Mark W. Stephenson, an economist at Cornell University, predicted prices peaking around $18 next spring. Prices depend on global and U.S. demand for dairy products, as well as how much milk production is lost to herd retirements, he said.

"I think that we still have quite a bit of cows to retire and we have to see when world and domestic economies begin to recover," Mr. Stephenson said Wednesday.

Economists blame the sour global economy for dampening demand for dairy products. They also say that generally, production has outstripped supply, leaving a surplus of nonfat dry milk products.

Some farm groups disagree with that assessment, pointing out that the milk powder has largely come from one state — California — and that dairy plants continue to import dairy ingredients such as milk protein concentrate.

Predictions of fast-rising prices next year could discourage the U.S. Department of Agriculture from taking the bold measures some farm groups support, such as making changes in the way it sets minimum prices paid to farmers. A spokesman for the National Milk Producers Federation, Christopher Galen, said his organization wants the USDA to focus on measures "in the here and now" rather than on long-term ideas that will require congressional review and implementation.

So far, the department has said little about its plans. Agriculture Secretary Tom Vilsack has spoken positively of the government buying more dairy products and distributing them through food programs, which would reduce inventories. But he has said nothing to suggest he supports subsidizing more exports or quickly appointing a commission to review federal milk pricing policies, a requirement of last year's five-year farm bill.