WASDE: USDA raises 2013 milk output projections, reduces price forecast

USDA’s World Ag Supply & Demand Estimates (WASDE) report, released July 11, raised projected 2013 milk production estimates by 200 million lbs. from a month earlier, but kept 2014 production estimates steady. Despite weaker forecast milk prices, forage supplies and feeding margins will likely continue to support modest gains in milk production.

• 2013 production and marketings were projected at 202.0 billion lbs. and 201.1 billion lbs., respectively. If realized, 2013 production and marketings would be up about 0.8% from 2012. 

• 2014 production and marketings were projected at 204.5 billion lbs. and 203.6 billion lbs., respectively. If realized, 2014 production and marketings would be up about 1.2% from 2013. 

The 2013 fat-basis export forecast is higher on continued robust exports of cheese. Skim-solid exports for 2013 are higher as nonfat dry milk (NDM) shipments are expected to remain strong. The United States has gained in export markets typically served by the European Union, which has experienced a slowdown in production. Export forecasts for 2014 are unchanged.

The fat-basis import forecast for 2013 is unchanged, but lowered on a skim-solid basis reflecting slower-than-expected imports of milk protein concentrates. 

Fat and skim-solid basis ending stock forecasts for 2013 are raised, as stocks of butter and cheese have remained large. Ending stock forecasts for 2014 are raised as well.

Cheese and butter prices are forecast lower for 2013, based on larger supplies. Prices for 2014 are lowered, as the larger carry-in stocks overhang the market. The 2013 NDM price forecast is raised from last month on strong export demand, but the forecast for 2014 is unchanged. The whey price forecasts for both 2013 and 2014 are unchanged from last month. 

As a result, the Class III price forecasts are lowered from last month in line with lower product prices. The Class IV price forecast is unchanged for 2013, as lower butter prices are largely offset by higher NDM prices. However, the Class IV price is lowered for 2014, reflecting lower butter prices.

The 2013 all milk price is forecast at $19.50-$19.80/cwt.; the 2014 price is projected in a range of $18.70-$19.70/cwt.

 

Dairy price forecasts

  Estimated Forecast Forecast
  2012 2013 2014
Class III ($/cwt.) 17.44 17.65-17.95 16.60-17.60
Class IV ($/cwt.) 16.01 18.20-18.60 17.65-18.75
All milk ($/cwt.) 18.53 19.50-19.80 18.70-19.70
Cheese ($/lb.) 1.7076 1.735-1.765 1.630-1.730
Butter ($/lb.) 1.5943 1.515-1.575 1.450-1.580
NFDM ($/lb.) 1.3279 1.615-1.645 1.585-1.655
Dry whey (¢/lb.) 59.35 58.5-60.5 56.5-59.5

Source: USDA WASDE report, July 11, 2013

Beef prices

Impacting cull cow prices, estimated 2013 beef production was reduced from last month. Steer and heifer slaughter in the second quarter was lower than expected, more than offsetting higher forecast slaughter in the second half of the year. However, the cattle price forecast for 2013 is lowered from last month, as prices have weakened recently. The 2013 steer price was estimated in a range of $124-$127/cwt., down $1-$3 from last month. The 2014 forecast is in a range of $126-$137/cwt., down $1-$2 from last month’s forecast.

 

Feed prices

On the cost side of the dairy equation, the 2013/14 season-average farm price for corn was projected at $4.40-$5.20/bushel, unchanged from last month, but down sharply from the record $6.75-$7.15/bushel average for 2012/13. 

Corn production for 2013/14 is lowered 55 million bushels with the lower harvested area and the projected yield unchanged at 156.5 bushels per acre. Projected production remains just below 14 billion bushels and would be 858 million above the record in 2009/10. Corn supplies for 2013/14 are lowered 90 million bushels, with a 5-million-bushel increase in imports only partly offsets the lower beginning stocks and production.

This month’s changes to corn use for 2012/13 and 2013/14 largely reflect the lateness of the 2013 crop and expectations for extremely tight supplies later this summer and into early fall. Feed and residual disappearance for 2012/13 is raised 50 million bushels, as early harvest of new-crop corn is expected to be sharply reduced from last year. Feed and residual use for 2013/14 is lowered 50 million bushels, with tighter beginning stocks and lower production, and also on the lack of early new-crop usage which tends to boost indicated disappearance during the September-December quarter of the new marketing year.  With lower projected use in 2013/14, ending stocks are raised 10 million bushels and remain just under 2 billion bushels.

The U.S. season-average soybean price for 2013/14 is forecast at $9.75-$11.75/bushel, unchanged, but down from  $14.40/bushel in 2012/13.  Soybean meal is forecast at $290-$330/ton in 2013/14, also unchanged from last month, and compared to $455/ton in 2012/13.

Soybean production is projected at 3.42 billion bushels, up 30 million due to increased harvested area. Harvested area, estimated at 76.9 million acres in the June 28 Acreage report, is 0.7 million above the June projection. The soybean yield is projected at 44.5 bushels per acre, unchanged from last month. Soybean supplies are 30 million bushels above last month’s forecast reflecting the production change. With projections for exports and crush unchanged, 2013/14 soybean ending stocks are raised 30 million bushels to 295 million. U.S. soybean supply and use projections for 2012/13 are unchanged.

Affecting cottonseed prices, USDA raised cotton ending stocks for both 2012/13 and 2014, due to a reduction in exports. Planted area and expected yield were increased, but expected harvested area was decreased, resulting in unchanged production totals relative to last month.

 

Feed price* outlook, season-average farm price

 

  Estimated Estimated Forecast
  2011/12 2012/13 2013/14
Corn ($/bushel) 6.22 6.75-7.15 4.40-5.20
Soybeans ($/bushel) 12.50 14.40 9.75-11.75
Soy meal ($/ton) 394 455 290-330

Source: USDA WASDE report, July 11, 2013

*Price paid to grower