Dairy farmers may find glimmers of sunshine in an otherwise dreary outlook, but they’ll have to weather the storm before seeing much price recovery.

Natzke dave
Editor / Progressive Dairy

The week of Jan. 8-12 saw declines across the board in Chicago Mercantile Exchange (CME) cash dairy product prices, led by a sharp drop in cheddar barrels. That sent January-July 2018 Class III futures to new contract lows. January-May 2018 Class III and Class IV futures contracts were all less than $14 per hundredweight (cwt) at the close of trading on Jan. 12.

While the near-term outlook grew worse, USDA’s monthly World Ag Supply and Demand Estimates report and annual Crop Production report provided a longer-term overview. Highlights follow:

• Milk production estimates were lowered for both 2017 and 2018, with slower growth in milk per cow expected to combine with a slower rate of growth in cow numbers. At 215.5 billion pounds, 2017 production is now forecast to be up 1.5 percent from 2016. At 218.8 billion pounds, 2018 production would be up 1.5 percent.

• Preliminary average 2017 milk prices improved by about $1.35 per cwt from 2016, less than earlier forecasts. The USDA calculated the following averages for 2017: Class III – $16.17 per cwt; Class IV – $15.16 per cwt; all milk – $17.65 per cwt.


• Based on current estimates, 2018 prices could look similar to 2016. USDA estimated the following averages (mid-point of range): Class III – $14.65 per cwt; Class IV – $14 per cwt; all milk – $16.20 per cwt.

• For 2018, all dairy product prices were projected lower on slowing domestic demand and heavy global competition.

Beef outlook

Impacting cull cow prices, the current pain on the milk bottom line could lead to increased herd liquidation, although the full impact will be determined by how many cows head to slaughter and how many just change addresses.

The USDA’s WASDE report raised estimated 2018 beef production from the previous month, based on higher expected fed cattle marketings and slaughter in the first half of 2018. Average carcass weights are also expected to be heavier.

Early-year strength is expected to support beef prices, including cull cow prices, in the first quarter, but cattle prices are expected to weaken somewhat as the year progresses. The USDA projected annual steer prices to average (mid-point of range) about $118 per cwt, which would be about $3.50 per cwt less than 2017. Strongest prices are forecast in the first quarter of 2018.

Likewise, the USDA previously forecast the 2017 national average cutter cow price at $64.87 per cwt, down from $70 per cwt in 2016 and $99.56 per cwt in 2015. First-quarter 2018 cull cow prices are anticipated to be slightly stronger, but lower for the rest of the year.

Feed outlook

On the feed side of the equation, January’s WASDE report left price projections mostly unchanged. 2017-18 marketing year soybean prices received by producers are forecast at $9.35 per bushel, compared to $9.47 per bushel in 2016-17; soybean meal prices are forecast at $315 per ton, compared to $317 per ton in 2016-17. Marketing-year corn prices are forecast at $3.25 per bushel, compared to $3.36 per bushel in 2016-17. Prices cited are mid-point of projected price range.

Forage overview

The USDA’s monthly and annual crop production summaries provided an overview of dairy forages and other feedstuffs. (More detailed information related to dairy forages is available through Progressive Dairyman’s sister publication, Progressive Forage). Among the highlights:

• Dry hay: Production of all dry hay for 2017 was estimated at 131 million tons, down 3 percent from 2016. Area harvested was up, but average yield was down. Production of alfalfa and alfalfa mixtures was estimated at 55.1 million tons, down 5 percent from 2016, with both acreage and yield lower. Production of other hay in 2017 totaled 76.4 million tons, down less than 1 percent from 2016. Increased harvested area was offset by lower average yield.

• Hay stocks on farms: Lower hay production, combined with increased hay exports and larger U.S. beef and dairy herds, resulted in the smallest on-farm hay inventories entering winter since 2012.

All hay stored on U.S. farms as of Dec. 1, 2017, totaled 86.2 million tons, down 10 percent from the previous December. Most of the hay inventory declines were in the western U.S., and primarily due to lower hay yields. Only Colorado and Wyoming reported larger hay inventories compared to a year earlier. Western states seeing the largest declines in on-farm hay inventories compared to a year earlier included Texas, North Dakota, Oklahoma, Kansas, South Dakota, Oregon and Montana.

In contrast, the majority of the eastern states reported higher stocks compared to the previous year, due to either increased acreage, higher yields, or both. States seeing the largest increases in inventories were Alabama, Indiana, Georgia, Ohio and Pennsylvania.

Among major dairy states, Texas, Minnesota, Oregon, Wisconsin and Idaho entered winter with substantially smaller hay inventories. Arizona, Florida, Utah and Vermont supplies were down slightly. Hay inventories in California and New Mexico were unchanged, while New York, Pennsylvania, Ohio and Indiana saw larger hay supplies.

• Alfalfa seeding: Looking ahead, new acreage seeded to alfalfa and alfalfa mixtures in 2017 was estimated at 2.21 million acres, down 3 percent from 2016 and the lowest acreage devoted to new seeding in at least two decades. Of the U.S. total, about 1.78 million acres were seeded in 22 major dairy states.

• Other forages: 17 states were included in an annual USDA forage estimation program, measuring production of all forage crops. The 17-state total for all forage production was 86.7 million tons. Of this total, 44 million tons were produced from alfalfa and alfalfa mixtures. Total 2017 haylage and greenchop production in those states was estimated at 30.5 million tons, of which 20 million tons were from alfalfa and alfalfa mixtures.

• Corn silage: Production was estimated at 128 million tons for 2017, up 2 percent from 2016. Area harvested for silage was estimated at 6.43 million acres, up 4 percent from a year ago, but average yield was estimated at 19.9 tons per acre, down 0.4 ton from 2016.

• Sorghum silage: Production was estimated at 3.77 million tons, down 10 percent from 2016. Both area harvested and average yield were lower.

• Cottonseed: The 2017 harvest was cut slightly from previous estimates, to 6.725 million tons. Nonetheless, it’s up 25 percent from last year and the largest total since 2006.  end mark

Dave Natzke