USDA’s monthly World Ag Supply and Demand Estimates (WASDE) report reduced the 2017 U.S. milk production forecast, with a slowdown in the growth of milk per cow offsetting a larger U.S. dairy herd. Despite the reduction, USDA also cut projected 2017 milk and dairy product prices, citing large domestic and international supplies.
Anticipated milk production in 2017 was cut by about 200 million pounds from last month’s forecast to 217.3 billion pounds. If realized, production would still be up about 2.3 percent from 2016’s total of 212.4 billion pounds.
Fat-basis exports were predicted lower due to weaker sales of whole milk powder (WMP), but solids-basis exports were raised, with higher sales of skim-based products. Ending stock forecasts were raised, reflecting current large supplies and lower expected domestic use.
Dairy products price forecasts for cheese, butter, nonfat dry milk and whey were all lowered compared to last month’s projections.
As a result, the 2017 Class III was forecast in a range of $16.10-$16.60 per hundredweight (cwt), down 50-60 cents from last month. The midpoint of $16.35 per cwt would be $1.48 more than 2016.
The 2017 Class IV price was forecast in a range of $14.30-$14.90 per cwt, down 45-55 cents per cwt from last month. The midpoint of $14.60 per cwt would be 83 cents per cwt more than 2016.
The all milk price for 2017 was lowered to a range of $17.40-$17.90 per cwt, down 40-50 cents from last month’s forecast. The midpoint of $17.65 per cwt would be $1.41 per cwt more than 2016.
This month’s 2016-17 U.S. corn outlook forecast increased corn used to produce ethanol, but reduced feed and residual use, resulting in no change in ending stocks. The projected range for the 2016-17 season-average corn price received by producers was narrowed, at $3.25 to $3.55 per bushel, with a midpoint unchanged at $3.40 per bushel. The 2015-16 average was $3.61 per bushel.
The soybean meal balance sheet changes included increased exports and lower domestic use. Projected prices paid to soybean producers for 2016-17 were narrowed to $9.40-$9.70 per bushel, with a midpoint lowered by a nickle to $9.55 per bushel. Prices for soybean meal were projected in a range of $310 to $330 per ton, down $10 at the top end. The 2015-16 averages were $8.95 per bushel for soybeans and $325 per ton for soybean meal.
USDA’s latest crop production report offered little in the way of new information affecting the markets. However, USDA’s 2017 Prospective Plantings report indicated 2017 U.S. corn acreage will be down about 4 percent from 2016, but 2 percent more than 2015. Growers intend to plant 90 million acres of corn for all purposes in 2017.
Soybean planted area for 2017 was estimated at a record high 89.5 million acres, up 7 percent from last year. Compared with last year, planted acreage intentions are up or unchanged in 27 of 31 states with soybean acreage estimates.
With U.S. average hay prices hovering at six-year lows, harvested area of all hay is expected to hold steady or decline in all Western and Southern states except Arkansas, Idaho and Washington. U.S. dry hay producers intend to harvest 52.8 million acres of all dry hay in 2017, down about 650,000 acres (1 percent) from 2016. If realized, this will represent the fourth consecutive annual decline since 2013, and the lowest total hay harvested area since 1908.
The estimates do not provide breakouts for alfalfa/alfalfa mixture and other dry hay. USDA details those estimates in an annual Acreage report, to be released June 30.
Dairy producers may also see some relief on cottonseed prices. All cotton planted area for 2017 was estimated at 12.2 million acres, 21 percent more than last year.
Impacting cull cow prices, the WASDE report raised the forecast for 2017 beef production, citing the current pace of slaughter and heavier-than-expected cattle weights in the first half of the year. The first-quarter 2017 steer price was estimated at nearly $123 per cwt. Prices are forecast to decline through the rest of the year, falling to a range of $110-$120 per cwt by the fourth quarter, and averaging $115-$121 per cwt for the year. The 2016 steer price averaged $121 per cwt.
March margins moved higher
Dairy margins improved slightly over the last two weeks of March, with milk price recovery combining with mostly steady feed prices, according to Commodity & Ingredient Hedging LLC. Margins remain relatively strong from a historical perspective, currently between the 70th and 80th percentile of the previous decade through the first quarter of 2018.
Milk prices received a boost following recent higher trade in cheese prices after a prolonged slump dating back to November. USDA’s latest Cold Storage report was bearish for cheese and particularly for butter, showing strong month-over-month and year-over year increases in both product inventories.
Global Dairy Trade index rises
There was some good news. The Global Dairy Trade (GDT) price index rose 1.6 percent during the latest auction, held April 4. Among individual product categories, prices for butter, cheddar cheese and skim milk powder were lower, with whole milk powder higher. The next GDT auction is April 18.
The GDT hit a milestone on April 4, surpassing $20 billion ($ U.S.) in sales during the auction. Now in its ninth year, GDT auctions have traded 5.8 million metric tons (12.8 billion pounds) of dairy ingredients since its inception, enough to fill more than 365,000 20-foot shipping containers.
- Progressive Dairyman
- Email Dave Natzke