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DairyProfit Update for Oct. 11, 2012

WASDE dairy picture: Slight improvement

USDA’s World Ag Supply & Demand Estimates report lowered projected milk production for 2012, but gave a slight boost to 2013 expectations, based on the outlook for slightly lower feed prices.

2012 production and marketings were projected at 199.6 billion lbs. and 198.6 billion lbs., respectively, both down 300 million lbs. from last month’s estimates. If realized, 2012 production and marketings would be up about 1.7% from 2011. The 2012 decrease reflects a slower rate of growth in milk per cow in the remainder of the year, more than offsetting a slower-than-expected decline in cow numbers during the last quarter. 

• 2013 milk production and marketings were estimated at 199.7 billion lbs. and 198.7 billion lbs., respectively, up 800 million lbs. from last month. If realized, both would be virtually unchanged from 2012. Higher forecast milk prices in late 2012 and into 2013 are expected to slow the rate of decline in cow numbers and help support higher growth in milk per cow in 2013.

With higher product prices, both the Class III and Class IV price forecasts were raised. The all-milk price is forecast at $18.50-$18.60/cwt. for 2012 and $19.00-$19.90/cwt. for 2013.

 

Corn, soy price forecasts lowered (a little)

On the cost side of the dairy equation, USDA’s World Ag Supply & Demand Estimates report lowered projected corn and soybean prices slightly. 

The 2011/12 estimated season-average corn price is $6.22/bushel, with the projected range for the 2012/13 season lowered 10¢ on both ends of the range compared to a month ago, to $7.10-$8.50/bushel. 

The U.S. season-average soybean price for 2012/13 is projected 75¢ lower on both ends of the range, to $14.25-$16.25/bushel, compared to a 2011/12 season-average price of $12.50/bushel. Soybean meal prices are projected at $470-$500/ton, down $15.00 on both ends of the range compared to last month’s forecast, but up well above the 2011/12 season-average price of $393.50/ton.

Despite the lower price forecasts, corn, soybean and soybean meal futures prices were all up on Oct. 11, after the USDA Crop Production and World Ag Supply & Demand Estimates reports.

 

Crop production report: Soybean outlook improved

USDA updated its Crop Production report, Oct. 11, showing the corn crop continuing to slide, but the soybean crop recovering a bit compared to a month ago.

Corn production is forecast at 10.7 billion bushels, down slightly from the September forecast and down 13% from 2011. This represents the lowest U.S. production since 2006. Yields are expected to average 122.0 bushels per acre, down 0.8 bushel from the September forecast and 25.2 bushels below the 2011 average. If realized, this will be the lowest average yield since 1995. 

Soybean production is forecast at 2.86 billion bushels, up 9% from September, but down 8% from last year. Area for harvest is forecast at 75.7 million acres, up 1% from September and up 3% from 2011. If realized, harvested area will be the third largest on record.  Yields are expected to average 37.8 bushels per acre, up 2.5 bushels from last month, but down 4.1 bushels from last year.

 

Dry hay production mixed; cottonseed higher

Looking at the dry hay harvest, USDA’s Crop Production report estimated production of alfalfa/alfalfa mixture hay at 55.6 million tons, up 1% from August, but down 15% from last year. If realized, this will be the lowest production level since 1953, with the lowest average yield since 1988. Harvested area is forecast at 18.8 million acres, down 2% from 2011. 

Production of other hay is forecast at 66.4 million tons, up 1% from both the August forecast and last year. If realized, this will be the second lowest production level since 1990. Based on Oct. 1 conditions, yields are expected to average 1.71 tons per acre, up 0.02 ton from August, but down 0.1 ton from last year. If realized, this will be the lowest U.S. yield since 1988. Harvested area is forecast at 38.8 million acres, up 6% from last year. 

2012 cottonseed production was forecast at 5.868 million tons, up 58,000 tons from September’s projections, and 9% more than a year ago.

 

MARKETS: Powder dips, Class III futures mixed

Today's market closing prices:

Butter: unchanged, at $1.93/lb.

Cheddar blocks: unchanged, at $2.10/lb.

Cheddar barrels: unchanged, at $2.06/lb.

Grade A nonfat dry milk: down 3.0¢, to $1.63/lb.

Extra Grade nonfat dry milk: unchanged, at $1.6350/lb.

Class III milk: 2¢ to 28¢ higher through April 2013; 2¢ to 7¢ lower, May-December 2013.

Based on current CME closing prices, the average for October-December 2012 is $20.89/cwt.; the full year 2012 average is $17.62/cwt.; and the 2013 average is $18.60/cwt.

 

Markets up after USDA reports

Corn: +20¢ to +36¢ through September 2013. The 2013 average is $7.00/bu.

Soybeans: +25¢ to +39¢ through September 2013. The 2013 average is $14.27/bu.

Soybean meal: +$9.60 to +$13.70/ton through September 2013. The 2013 average is $422.28/ton.

 
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