← Return to Home Page

DairyBusiness Update: August 12, 2014

Print

WASDE: 2014 & 2015 Milk Output Estimate Raised Slightly
   USDA’s World Agricultural Supply and Demand Estimates (WASDE) report, released August 12, raised its milk production forecasts for 2014 and 2015 slightly as lower feed costs are expected to support higher output per cow.
   • 2014 production and marketings were projected at 206.0 billion lbs. and 205.0 billion lbs., respectively. Both are up 100 million lbs. from last month’s projections. If realized, 2014 production and marketings would be up 2.4% from 2013. 
• 2015 production and marketings were projected at 212.5 billion lbs. and 211.6 billion lbs., respectively. They are up 100 million lbs. and 200 million lbs. respectively from a month ago. If realized, 2015 production and marketings would be up about 3.2% from 2014. 
   Fat basis export forecasts for 2014 and 2015 were lowered as Russia’s ban on imports from a number of dairy exporting countries will likely increase competition in export markets. Fat basis imports were raised as supplies in competing exporters are expected to be large. The skim-solids export forecast was raised slightly for 2014, but was reduced in 2015 as competition increases. Skim-solids imports were unchanged from last month.
   Butter prices and whey price forecasts were raised for 2014 with strength in butter prices expected to carry into 2015. Cheese prices and nonfat dry milk prices were forecast higher in 2014, but their price forecasts for 2015 were unchanged from last month. Class III and Class IV prices for 2014 were raised on stronger component product prices and the Class III price forecast for 2015 was raised reflecting strength in whey prices. The all milk price was raised to $23.55 to $23.75 per cwt for 2014, but remains unchanged at $19.75 to $20.75 per cwt for 2015.

Quick Glance
Dairy price forecasts 
Estimated Forecast
Product 2013 2014 2015    
Class III ($/cwt) 17.99 21.25-21.45 17.00-18.00
Class IV ($/cwt) 19.05 22.35-22.65 18.70-19.80
All milk ($/cwt) 20.05 23.55-23.75 19.75-20.75
Cheese ($/lb.) 1.7683 2.0500-2.0700 1.6700-1.7700
Butter ($/lb.) 1.5451 2.0400-2.0800 1.6550-1.7850
NFDM ($/lb.) 1.7066 1.8450-1.8650 1.6050-1.6750
Dry whey (¢/lb.) 0.5902 0.6400-0.6600 0.5650-0.5950

Source:USDA WASDE report, August 12, 2014

WASDE Crop Update
   Projected 2014/15 U.S. feed grain supplies in today’s World Agricultural Supply and Demand Estimates report (WASDE) were raised this month with higher production forecasts for corn, sorghum, barley, and oats. Corn production for 2014/15 is forecast
172 million bushels higher at a record 14,032 million bushels. The first survey-based corn yield forecast, at a record 167.4 bushels per acre, is up 2.1 bushels from last month’s trend-based projection. Sorghum production is forecast 19 million bushels higher with the forecast yield 3.0 bushels per acre higher than last month’s projection. Small yield increases also boost barley and oats production slightly.
   Corn supplies for 2014/15 are projected at a record 15,243 million bushels with the increase in production partly offset by a 65-million-bushel reduction in beginning stocks. Corn use for ethanol and exports are raised 45 million bushels and 20 million bushels, respectively, for 2013/14, based on reported data to date. Projected corn use for  2014/15 is higher with use for ethanol and exports each raised 25 million bushels, and feed and residual disappearance 50 million bushels higher with the larger crop.  Projected ending stocks for 2014/15 are raised slightly to 1,808 million bushels.
The projected season-average farm price for corn is lowered 10 cents at both ends of the range to $3.55 to $4.25 per bushel.
   Global coarse grain supplies for 2014/15 are projected 4.9 million tons higher, mostly reflecting larger expected corn crops in the United States and EU and increased barley production for FSU-12. The smaller projected carryin for the United States partly offsets this month’s 6.6-million-ton increase in global coarse grain output. EU corn production is raised 1.4 million tons after abundant rainfall and favorable temperatures during July.
   FSU-12 barley production is raised 3.1 million tons with a 2.0-million-ton increase for Russia and smaller increases for Belarus and Ukraine. Barley production is also raised 0.3 million tons for EU. Reduced prospects for corn, sorghum, and millet, with the delayed monsoon, lower India total coarse grain production 2.7 million tons, partly offsetting increases elsewhere. Turkey corn production is also lowered 0.3 million tons.
  
Global coarse grain consumption for 2014/15 is raised this month with a 2.3-million-ton increase in world corn use. Higher corn use in the United States accounts for most of the increase. Corn consumption is lowered 2.0 million tons for EU as heavy summer rains have reduced wheat quality across the region, raising prospects for wheat feeding.  
   Corn food use is reduced 0.5 million tons for India with the smaller crop outlook. Higher projected corn use for Egypt, Saudi Arabia, South Africa, Algeria, and Taiwan partly offset these reductions. Corn imports are lowered for EU, but raised for Turkey, Saudi Arabia, Taiwan, Lebanon, and Algeria. Global barley trade is raised with higher imports for Turkey and higher exports for Russia and Ukraine. Global 2014/15 coarse grain ending stocks are projected 2.7 million tons higher reflecting larger barley ending stocks. Global corn ending stocks are lowered slightly.
   U.S. oilseed production for 2014/15 is projected at 113.7 million tons, up 0.6 million from last month mainly due to a higher soybean production forecast. Soybean  production for 2014/15 is forecast at 3,816 million bushels, up 16 million due to a higher yield. Harvested area is forecast at 84.1 million acres, unchanged from July. The first survey-based soybean yield forecast is a record 45.4 bushels per acre, 0.2 bushels above last month and 2.1 bushels above last year.
   Soybean supplies for 2014/15 are projected slightly above last month based on the higher production forecast. With minimal supply gains, soybean exports and crush are unchanged, leaving ending stocks projected at 430 million bushels.
   The U.S. season-average soybean price for 2014/15 is forecast at $9.35 to $11.35 per bushel, down 15 cents on both ends. Soybean meal and oil prices are forecast at $340 to $380, down 10 dollars at the midpoint. Soybean oil prices are forecast at 35 to 39 cents per pound, down 1 cent at the midpoint.
   U.S. soybean balance sheet changes for 2013/14 include reduced imports and increased exports. Imports are lowered 5 million bushels to 80 million based in part on revised import data for September – December 2013 from the U.S. Department of Commerce. Exports are raised 20 million bushels to 1,640 million reflecting both revised export data for September through December 2013 from the Department of Commerce and inspections data for July 2014. These changes are offset with lower residual use, leaving ending stocks unchanged at 140 million bushels. With these changes, the 2013/14 soybean stocks-to-use ratio is projected at 4.2 percent, which if realized would be the lowest in more than 40 years.
   Global oilseed production for 2014/15 is projected at 521.8 million tons, slightly below last month. Gains for rapeseed and cottonseed are more than offset by reductions for soybeans, sunflower seed, and peanuts. Higher soybean production for the United States is offset by a reduction for India where the delayed monsoon results in lower planted area. Rapeseed production is raised for China, EU, and Ukraine. These gains are partly offset by a smaller crop projected for Canada with lower area resulting from flooding in parts of Saskatchewan and Manitoba. Other changes include lower sunflower seed production for Russia, reduced peanut production for China, and increased cottonseed production for India.
   Read the complete WASDE at: http://www.usda.gov.oce/commodity/wasde/latest.pdf.

U.S. Crops Poised for New Records
   The Agriculture Department’s latest Crop Production report issued this morning forecasts corn production at 14.0 billion bushels, up 1 percent from 2013. Based on conditions as of August 1, yields are expected to average 167.4 bushels per acre, up 8.6 bushels from 2013. If realized, this will be the highest yield and production on record for the United States. Area harvested for grain is forecast at 83.8 million acres, unchanged from the June forecast but down 4 percent from 2013.
   Soybean production is forecast at a record 3.82 billion bushels, up 16 percent from last year. Based on August 1 conditions, yields are expected to average a record high 45.4 bushels per acre, up 2.1 bushels from last year. Area for harvest in the United States is forecast at a record 84.1 million acres, unchanged from June but up 11 percent from last year.
   All cotton production is forecast at 17.5 million 480-pound bales, up 36 percent from last year. Yield is expected to average 820 pounds per harvested acre, down slightly from last year. Upland cotton production is forecast at 16.9 million 480-pound bales, up 38 percent from 2013. Pima cotton production, forecast at 556,000 bales, is down 12 percent from last year. Producers expect to harvest 10.2 million acres of all cotton, up 36 percent from 2013. This harvest total includes 10.1 million acres of Upland cotton and 175,900 acres of Pima cotton.
   The complete report is posted at: http://usda.mannlib.cornell.edu/usda/current/CropProd/CropProd-08-12-2014.pdf

Hay Production Up 11%
   Production of alfalfa and alfalfa mixture dry hay for 2014 is forecast at 63.6 million tons, up 11 percent from 2013, according to USDA’s Crop Production report issued this morning. Based on August 1 conditions, yield is expected to average 3.50 tons per acre, up 0.26 ton from last year. If realized, yield would be the second highest on record behind only the 1999 average yield of 3.51 tons per acre. Harvested area is forecast at 18.2 million acres, unchanged from June, but up 2 percent from 2013. New Mexico and  Pennsylvania are expecting record high yields in 2014. With the exception of the continuing drought in the far western United States, much of the growing season has been characterized by good moisture and cooler than average temperatures. This resulted in favorable conditions for most of the Nation’s alfalfa hay crop.
   Production of other hay is forecast at 77.2 million tons, down 1 percent from 2013. Based on August 1 conditions, yields are expected to average 1.96 tons per acre, up 0.02 ton from last year. Harvested area is forecast at 39.5 million acres, unchanged from June, but down 3 percent from 2013. Producers in Alabama, Colorado, Louisiana, Nebraska, and Wyoming are expecting record high yields in 2014. Adequate moisture, excluding the far western States, has producers expecting similar yield and production as last year.

Prospects for Corn Consumption
   With expectations of a record large U.S. corn crop in 2014, market attention will soon shift to prospects for corn consumption, write Dr. Darrel Good of the Department of Agricultural and Consumer Economics at the University of Illinois in his latest FarmDoc Daily posting. The market will follow a number of indicators of potential use as well as the revealed pace of consumption in the ethanol, export, and feed markets.
   Ethanol use of corn has increased during the 2013-14 marketing year following a sharp decline during the 2012-13 marketing year. The increase has been fueled by a combination of increased domestic consumption of ethanol, increasing exports and declining ethanol imports, and some rebuilding of ethanol stocks. Based on U.S. Energy Information Administration monthly estimates of ethanol production from September 2013 through May 2014 and weekly estimates for June and July 2014, it appears that domestic ethanol production will reach about 14.1 billion gallons during the 2013-14 corn marketing year that ends on August 31.That compares to about 12.8 billion gallons during the 2012-13 corn marketing year and 13.8 billion gallons during the 2011-12 corn marketing year. Ethanol production of 14.1 billion gallons points to corn consumption of about 5.1 billion bushels during the current marketing year.   
   Ethanol production during the upcoming marketing year will likely be supported by a continuation of a positive trade balance and a further increase in domestic consumption, but will not likely benefit from any further build-up of stocks. A positive trade balance should be supported by relatively low ethanol prices and relatively high gasoline prices as well as favorably priced U.S. ethanol relative to Brazilian ethanol.  Domestic consumption should benefit from a modest increase in domestic motor fuel consumption. The EPA's final rulemaking for the Renewable Fuels Standards (RFS) is not expected to have much impact on domestic ethanol consumption during the year ahead. The primary impact from the expected reversal of the preliminary write down of the renewable mandate for 2014 would be to incentivize a small increase in consumption of E15 and E85. Domestic ethanol production during the year ahead should be maintained at or slightly above the level of the current marketing year, pointing to corn consumption of 5.15 to 5.2 billion bushels.   
   U.S. corn exports during the current marketing have exceeded early season projections, with the latest USDA projection at 1.9 billion bushels.  Census Bureau estimates of exports are available for the first 10 months of the 2013-14 marketing year. Exports during that period exceeded USDA export inspection estimates by 49 million bushels.  Assuming that margin persisted through early August, exports during the final 3.43 weeks of the marketing year need to average 35.9 million bushels per week to reach 1.9 billion bushels.  Inspections averaged 37.4 million bushels per week for the four weeks ended August 7.  
   In the July WASDE report, the USDA forecast 2014-15 marketing year corn exports at 1.7 billion bushels. The expected year-over-year decline reflects a projected decline in world corn trade and a loss of market share to Argentina. As of July 31, the USDA reported that 305 million bushels of corn had been sold for export during the upcoming marketing year, about 60 million bushels less than sales of a year earlier. Sales to Japan and Mexico exceed those of a year ago, but sales to China are down sharply.     
   Corn exports are difficult to anticipate as they will be influenced by the size of crops in a number of areas (some of which are not yet even planted) and the volatile world political environment. Some production issues in China, the much lower price of corn, and the competitive price of corn relative to other grains are all positive for U.S. export prospects.
   Feed and residual use of corn is also difficult to anticipate, largely due to the apparent variation in the "residual" component of use. Residual use is thought to be positively correlated with crop size so a large crop this year would point to another year of large residual use. Feed use of corn is obviously influenced by livestock and livestock product production and the unknown variation in feeding rates per animal. The USDA has projected a one percent increase in the number of grain consuming animal units during the 2014-15 marketing year. In addition, corn feeding rates should be supported by lower feed prices, low corn prices relative to other feed ingredients, and positive profit margins for all the livestock sectors. Weekly, monthly, and quarterly USDA livestock and grain stocks reports will be followed closely to judge potential feed use of corn.  Some small expansion in dairy cattle numbers is occurring, but broiler placements are running near the level of a year ago. A decline in the reported cases of PED virus along with the continuation of heavier slaughter weights may support corn feeding in the pork sector.   
   The number of cattle being fed, however, will remain below the level of the previous year for an extended time. A modest increase in feed and residual use should be expected during the year ahead.
   The typical corn price pattern in a large crop year is for cash prices to reach a low near harvest and then to increase modestly as the marketing year progresses. Such a pattern is dependent on corn consumption increasing in response to low prices. Early indications are for such a pattern to unfold this year.

California Ramps Up New Pricing Proposal
   California Department of Food and Agriculture (CDFA) Secretary Karen Ross has proposed a significant change to the way milk is priced in the state of California.
   “We're having discussions with the dairy industry in the hopes that something (draft legislation) can occur this year,” CDFA’s Steve Lyle told DairyBusiness.
   The proposal would index California Class 4a and 4b regulated minimum prices to announced Federal Order Class III and IV prices. It would also allow for manufacturing milk processors to enter into individual agreements to purchase milk outside of the pool.
    “Actually we had a pretty good discussion,” Western United Dairymen CEO Michael Marsh said of a recent meeting. “Although producers and processors are not on the same page…which probably doesn’t surprise you.”
   Marsh says he’s happy that Secretary Ross recognizes there is a significant problem with California’s 4b price. He said there’s a transition period where indexing would be at a certain level below the federal prices. Early estimates indicate that it would be a substantial amount of additional money for dairymen coming out of the 4b price, but they would also give up a little bit on the indexing of the Class IV price.
   Regarding the de-pooling of milk, WUD asked the Secretary to include an independent economic analysis on the impact it has on producers and processors as well as on plant capacity. Also within 36 months, producers by referendum would be allowed to vote as to whether or not they wanted to continue de-pooling in a California milk marketing order.
   “We’re really trying to get some additional protections into the secretary’s proposal on behalf of California dairymen,” Marsh said.
   A joint meeting of the Dairy Task Force and the Dairy Advisory Committee is scheduled for Wednesday (August 13th), where they hope to review the Secretary’s final draft.
   “This is the Secretary’s own attempt to come up with draft legislation, and we’re looking at what her thoughts are,” Marsh said. “We’ll know also whether she has chosen to include some of the additional protections to dairymen that WUD proposed.” The Secretary must move quickly as the California legislature concludes their session August 31st.
   That would mean the legislation would have to move through policy committees of both the Assembly and the Senate, followed by the same legislation off both floors and then to the governor’s desk.

CWT Accepts 5 Requests for Export Assistance
   Cooperatives Working Together (CWT) accepted 5 requests for export assistance today from Dairy Farmers of America, Michigan Milk Producers Association, and Tillamook County Creamery Association to sell 277,782 pounds of Cheddar cheese and 1.587 million pounds of whole milk powder to customers in Asia, the Middle East, North Africa, and South America.
   The product will be delivered through December 2014 and raised CWT’s 2014 cheese exports to 80.579 million pounds, plus 48.051 million pounds of butter and 19.877 million pounds of whole milk powder to 43 countries on six continents. These sales are the equivalent of 2.024 billion pounds of milk on a milkfat basis.

Mielke Market Daily 
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update Associate Editor Lee Mielke)
   What goes down, must come up, or so it would appear in the cash cheese market where the Cheddar blocks reversed yesterday’s 1¢ decline and jumped 2¢ to the good this morning, hitting $2.11/lb. Three cars were sold, the first two at yesterday’s close, the last at $2.11/lb. A bid at $2.10/lb. was left on the board as was an offer at $2.12lb. An unfilled bid took the Cheddar barrels up 1.5¢ after gaining 1.25¢ yesterday on a bid, and are now proudly sitting at $2.15/lb., the highest they have been since April 29, 2014 and 4¢ above the blocks.
   Class III futures responded, with Aug. +15¢, Sept. +26¢, & Oct. +23¢.
   Cash Double A butter ticked up another 2¢ this morning, after gaining 1¢ yesterday, and hit $2.43/lb. Six cars were sold today, down from 16 yesterday. The first three loads were at yesterday’s $2.41/lb. but the price kept inching higher from there. Two bids at $2.42/lb. were not filled.  
   The powder got another dose of the “daily drop,” giving up another 2¢ on two uncovered offers, following yesterday’s 2¢ decline, and is now trading at $1.50/lb. A bid at $1.45/lb. was unfilled. The spot powder has plunged 15¢ in seven consecutive sessions.  

Today’s Market Closing Prices 
Butter: Up 2¢, to $2.43/lb.
Cheddar blocks: Up 2, to $2.11/lb.   
Cheddar barrels: Up 1.5¢, to $2.15/lb.
Grade A nonfat dry milk: Down 2¢, to $1.50/lb.  
Class III milk (prelim.): Aug. $22.02/cwt., +15¢; Sept. $22.06, +26¢, Oct. $21.04, +23¢; Nov. $19.93, +13¢; & Dec. $19.20, +5¢. Based on today’s CME settlements, the Fourth Quarter 2014 average now stands at $20.06, +14¢ from Monday. The First Quarter 2015 average is now at $18.15, +1¢ from Monday. The Second Quarter 2015 average today stands at $17.95, + 2¢ from Monday.

-----
Looking ahead:
   The Agriculture Department’s weekly National Dairy Products Sales Report is out tomorrow afternoon, which details the prices USDA uses to calculate Federal order Class milk prices. That’s it for the rest of this week as far as USDA reports which we regularly monitor. Next week is busier. The monthly Livestock, Dairy, and Poultry Outlook is out Monday, along with the weekly Crop Progress report, the next Global Dairy Trade auction is Tuesday, and the preliminary July Milk Production report estimate is out Tuesday afternoon. The September Federal order Class I base milk price is announce by USDA on Wednesday, the weekly National Dairy Products Sales Report is out Wednesday afternoon, Livestock Slaughter report is out Thursday, and preliminary data from the July Cold Storage report is issued Friday afternoon.

  --- 
Wednesday on DairyLine:
    Record Production, and record yields. We’ll recap of the latest crop report with
         comments from University of Illinois Ag Economist Scott Irwin.
   Dr. Dan Undersander previews his latest webinar in PDPW’s “Your Bottom Line”
         segment.

http://dairyline.com/wednesday.mp3

 

background_banner