Projected milk output reduced slightly; stronger prices forecast

USDA’s World Ag Supply & Demand Estimates (WASDE) report, released April 10, reduced projected 2013 milk production estimates by about 100 million lbs. from a month earlier, but left 2012 estimates unchanged. The 2013 increase was cut largely due to a small reduction in first-quarter milk production per cow. Cow number estimates were unchanged from a month ago.

• 2013 production and marketings were projected at 201.8 billion lbs. and 200.8 billion lbs., respectively. If realized, 2013 production and marketings would be up about 0.7% from 2012. 

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

Fat-basis imports were reduced mostly on lower imports of anhydrous products. The skim solids import forecast was reduced largely on lower expected imports of milk protein concentrates. Export forecasts were unchanged from last month. Fat-basis ending stocks are forecast higher, but skim-basis stocks are lowered.

With slightly lower forecast 2013 milk production and improved domestic product demand, price forecasts for cheese, butter, nonfat dry milk  and whey were raised (see Table 1). As a result, both Class III and Class IV price forecasts are higher than last month, and the projected all milk price for 2013 is also higher, at $19.45-$19.95/cwt.

Table 1. Dairy price forecast

  Estimated Estimated Forecast
  2011 2012 2013
Class III ($/cwt.) 18.37 17.44 17.85-18.35
Class IV ($/cwt.) 19.04 16.01 18.10-18.70
All milk ($/cwt.) 20.14 18.51 19.45-19.95
Cheese ($/lb.) 1.8246 1.7076 1.735-1.785
Butter ($/lb.) 1.9498 1.5943 1.560-1.640
NFDM ($/lb.) 1.5058 1.3279 1.585-1.625
Dry whey (¢/lb.) 53.25 59.30 60.5-63.5

Source: USDA WASDE report, April 10, 2013


Feed price outlook

On the cost side of the dairy equation, the 2012/13 estimated season-average corn price range was lowered, in a range of $6.65-$7.15/bushel (see Table 2). The U.S. season-average soybean price was unchanged in a range of $13.80-$14.80/bushel, but soybean meal prices were projected down $10/ton, in a range of $415-$435/ton.

U.S. corn ending stocks for 2012/13 were projected higher this month, with corn feed and residual disappearance lowered 150 million bushels. Estimated corn used for ethanol was raised 50 million bushels, as larger-than-expected March 1 corn supplies, lower corn prices and favorable margins for producing and blending ethanol limit the expected year-to-year decline in ethanol production during the second half of the marketing year (March-August). 

 U.S. soybean ending stocks were projected at 125 million bushels, unchanged from last month.


Table 2. Feed price* forecast

  Estimated Estimated Forecast
  2010/11 2011/12 2012/13
Corn ($/bu.) 5.18 6.22 6.65-7.15
Soybeans ($/bu.) 11.30 12.50 13.80-14.80
Soybean meal ($/ton) 346 394 415-435

* Estimated price received by the crop producer

Source: USDA WASDE report, April 10, 2013


 Beef production estimates were reduced from last month, with increased cow slaughter somewhat offsetting lower expected fed cattle and bull slaughter. While the projected 2013 average steer beef price was unchanged from last month, prices were forecast slightly higher for the second half of the year. The 2013 steer price was estimated in a range of $125-$132/cwt., with a range of $127-$132/cwt. in the fourth quarter. That should maintain strong cull cow prices.