DairyProfit Update for Dec. 11, 2012

‘Total solids’ trade balance

In October, exports were equivalent to 13.0 percent of U.S. milk solids production, bringing the year-to-date percentage to 13.5 percent. Exports were equivalent to 13.3 percent of U.S. milk solids production in 2011 and 12.8 percent in 2010. Meanwhile, imports as a percent of milk solids production were just 3.0 percent in October 2012.

Source: U.S. Dairy Export Council, National Milk Producers Federation

U.S. export volumes slightly lower in October

Source: U.S. Dairy Export Council

Overall U.S. dairy exports were slightly lower in October (vs. September) – down by about 2% by volume and down fractionally by value (daily-average basis).

NDM/SMP shipments (33,107 metric tons) continue to decline: down 5% vs. September and the lowest since July 2010. In the third quarter, half the volume went to Mexico, while about a quarter went to Southeast Asia.

Cheese exports (19,149 mt) were up slightly from September, but were still down by nearly one third since peaking in May. Total whey volume (39,495 mt) was down slightly for the fourth straight month. In a bit of a reversal, dry whey improved on recent months, posting the best figure since June, while WPC exports declined compared with recent months, registering the lowest figure since March. On the other hand, butterfat volume (4,018 mt) posted its highest figure since May, coming in 43% above a year ago.

Total dairy export value in October was $412.9 million, up fractionally from a year ago. Year-to-date value is $4.388 billion, up 11% from last year. With two months to go, U.S. exports remain on track to top $5 billion in 2012.

WASDE: Dairy outlook changes small

USDA’s World Ag Supply & Demand Estimates (WASDE) report, released Dec. 11, left 2012 and 2013 milk production estimates unchanged from a month earlier.

• 2012 production and marketings were projected at 199.7 billion lbs. and 198.7 billion lbs., respectively. If realized, 2012 production and marketings would be up about 1.8% and 1.7%, respectively, from 2011.

• 2013 milk production and marketings were also unchanged at 199.7 billion lbs. and 198.7 billion lbs., respectively.

Compared to a month ago, 2012 and 2013 milk and product prices were mixed, with projected 2012 cheese and butter prices reduced, but nonfat dry milk and dry whey prices raised. In 2013, butter price projections were reduced, with cheese, nonfat dry milk and dry whey all forecast higher.

Projected producer Class III and Class IV milk prices were just as mixed, with only minor changes forecast. As a result, the 2012 all-milk price was unchanged at $18.50-$18.60/cwt., while the 2013 all-milk price was narrowed to $19.15-$19.95/cwt.

On the cost side of the dairy equation, the 2012/13 estimated season-average corn price range was lowered 15¢-25¢/bushel, in a range of $6.80-$8.00/bushel. The U.S. season-average soybean price was projected 45¢/bushel lower on both ends of the range, at $13.55-$15.55/bushel; and soybean meal prices were projected down $15/ton compared to last month’s forecast, at $440-$470/ton.

Beef price outlook stays strong

Even though USDA raised 2013 beef production estimates, USDA’s World Ag Supply & Demand Estimates report also raised the beef price forecast slightly, which could strengthen cull cow prices. Projected beef production was raised, due to higher fed and non-fed cattle slaughter and heavier carcass weights. Steer prices were raised to nearly $123/cwt. for 2012, and in a range of $124-$134/cwt. in 2013 (up $1 on each end of the range), reflecting strong demand for cattle through the end of this year and into 2013.

Crop Report: Cottonseed

While USDA’s Crop Production report, also released Dec. 11, primarily covered fruits and nuts, it did update cottonseed estimates. The 2012 harvest is estimated at 5.842 million tons, down about 26,000 tons from the October estimate, but 472,000 tons more than 2011.

MARKETS: Cheese holds; Class III futures up

Today's market closing prices:

Butter: up 0.5¢, to $1.5950/lb.

Cheddar blocks: unchanged at $1.76/lb.

Cheddar barrels: unchanged at $1.66/lb.

Grade A nonfat dry milk: unchanged, at $1.5575/lb.

Extra Grade nonfat dry milk: unchanged, at $1.56/lb.

Class III milk: +4¢ to +24¢, January through December 2013. Based on current CME closing prices, the 2012 average is $17.43/cwt.; the 2013 average is $18.46/cwt.; and the 2014 average is $16.18/cwt.

Corn and soybean futures lower; meal mixed

Corn: -2¢ to -9¢ through December 2013. The 2013 average is $6.92/bu.

Soybeans: -3¢ to -13¢ through November 2013. The 2013 average is $14.21/bu.

Soybean meal: -$2.80 to +$3.30/ton through December 2013. The 2013 average is $413.46/ton.

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