WASDE: Milk production outlook changes course
In a reversal from previous months, USDA’s July 11 World Ag Supply & Demand Estimates (WASDE) report cut U.S. milk production and marketing estimates for both 2012 and 2013, as higher feed prices are expected to pressure producer returns and encourage a more rapid decline in the cow herd. Milk per cow is also reduced due to higher forecast feed prices this year and next. In addition, milk yields in the short term may be affected by recent high temperatures.
• Total 2012 production and marketings were projected at 201.6 billion lbs. and 200.6 billion lbs., respectively, both down 600 million lbs. from last month’s estimate. If realized, both would be up about 2.7% from 2011.
• Total 2013 milk production and marketings were estimated at 201.7 billion lbs. and 200.7 billion lbs., respectively. Both are down 900 million lbs. from last month’s forecast and, if realized, would be virtually unchanged from 2012.
Imports expectations were raised on a fat basis, reflecting stronger imports of cheese. Exports forecasts were raised on stronger sales of cheese, whey, and nonfat dry milk (NDM).
Cheese prices are now forecast higher for 2012 and into early 2013, as stronger exports support prices (see below). Butter prices are forecast higher in 2012, but weaker domestic demand is expected to offset lower production in 2013, and the price forecast is unchanged. Weaker expected domestic demand will also limit price movements for NDM and whey. The NDM price was reduced slightly from last month, but the forecast for 2013 is unchanged. The whey price forecasts for both 2012 and 2013 were unchanged from last month.
The Class III price forecasts for 2012 and 2013 were raised from last month, due to the higher forecast cheese price, and the Class IV price for 2012 was raised on the higher butter price. The 2012 all milk price is forecast at $17.05-$17.35/cwt., and the 2013 all milk price for 2013 was raised to $17.35-$18.35/cwt.
Chicago Mercantile Exchange futures prices are slightly more bullish than USDA’s price forecats. Based on closing prices as of July 10, the average for July-December 2012 is $17.51/cwt.; the full year 2012 average is $16.70/cwt.; and the 2013 average is $17.24/cwt.
Product 2011 2012 2013
Class III ($/cwt) 18.37 16.00-16.30 16.25-17.25
Class IV ($/cwt) 19.04 14.55-14.95 15.40-16.50
All milk ($/cwt) 20.14 17.05-17.35 17.35-18.35
Cheese ($/lb.) 1.8246 1.590-1.620 1.605-1.705
Butter ($/lb.) 1.9498 1.470-1.530 1.465-1.595
NFDM ($/lb.) 1.5058 1.210-1.240 1.320-1.390
Dry whey (¢/lb.) 53.25 54.0-56.0 55.5-58.5
Source: USDA World Ag Supply & Demand Estimates (WASDE) report, July 11, 2012