More milk, weaker Class III prices projected

USDA’s World Ag Supply & Demand Estimates (WASDE) report, released March 8, raised projected 2013 milk production estimates by about 900 million lbs. from a month earlier. The higher outlook was  largely due to a slower pace of herd reduction and higher first-quarter milk production per cow. 

• 2013 production and marketings were projected at 201.9 billion lbs. and 200.9 billion lbs., respectively. If realized, 2013 production and marketings would be up about 0.8% from 2012. 

• at 200.3 billion lbs. and 199.3 billion lbs., 2012 milk production and marketings were up 2.1% from 2011. 

The 2013 fat-basis export forecast was raised largely on stronger shipments of butter. Skim-solid exports were raised based on greater shipments of nonfat dry milk (NDM). Imports are unchanged on both a fat and skim-solids basis.

Projected prices for cheese and whey were lowered (see Table 1), due to expectations of increased production and moderate demand. The forecast butter price was unchanged, although the range tightened. The forecast price of NDM was raised, as stronger export demand is expected. 

As the result, the 2013 Class III milk price forecast was reduced from last month, reflecting weaker cheese and whey prices, while the projected Class IV was increased, due to higher NDM prices. The 2013 projected all-milk price was raised to $19.00-$19.60/cwt.


Table 1. Dairy price forecast

  Estimated Estimated Forecast
  2011 2012 2013
Class III ($/cwt.) 18.37 17.44 17.55-18.15
Class IV ($/cwt.) 19.04 16.01 17.35-18.05
All milk ($/cwt.) 20.14 18.51 19.00-19.60
Cheese ($/lb.) 1.8246 1.7076 1.710-1.770
Butter ($/lb.) 1.9498 1.5943 1.540-1.630
NFDM ($/lb.) 1.5058 1.3279 1.505-1.555
Dry whey (¢/lb.) 53.25 59.30 60.0-63.0

Source: USDA WASDE report, March 8, 2013


Feed price outlook

On the cost side of the dairy equation, the 2012/13 estimated season-average corn price range (see Table 2) was lowered, in a range of $6.75-$7.45/bushel. The U.S. season-average soybean price was narrowed to a range of $13.80-$14.80/bushel; and soybean meal prices were projected down $10/ton at the midpoint, in a range of $425-$445/ton.


Table 2. Feed price* forecast

  Estimated Estimated Forecast
  2010/11 2011/12 2012/13
Corn ($/bu.) 5.18 6.22 6.75-7.45
Soybeans ($/bu.) 11.30 12.50 13.80-14.80
Soybean meal ($/ton) 346 394 425-445

* Estimated price received by the crop producer

Source: USDA WASDE report, March 8, 2013


Beef price outlook stays strong

The top end of projected beef prices was lowered slightly, potentially impacting cull cow prices. The 2013 steer price was estimated in a range of $125-$132/cwt. Beef production estimates were raised, largely due to heavier expected carcass weights. Estimated steer and heifer slaughter was reduced for the first quarter of 2013, but cow slaughter was raised. First-quarter dairy cull cow slaughter has been especially strong.