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Economic outlook: Higher 2022 milk production forecast has small impact on projected prices

Progressive Dairy Editor Dave Natzke Published on 12 May 2022

The USDA’s monthly World Ag Supply and Demand Estimates (WASDE) report, released May 12, revised the 2022 U.S. milk production estimate upward, with higher milk cow inventories more than offsetting slower growth in milk per cow. With the increased production, the outlook for farm-level milk prices was steady to only slightly lower.

Compared to last month, the USDA raised the 2022 milk production forecast by another 400 million pounds to 226.7 billion pounds. If realized, 2022 production would be up just 0.2% from 2021.

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Cheese and butter price forecasts are raised from the previous month on strong demand, but nonfat dry milk and whey prices were lowered. The projected annual average Class III price was unchanged from last month at $22.75 per hundredweight (cwt). The projected Class IV price was reduced 25 cents to $23.80 per cwt. The 2022 all-milk price forecast was lowered a nickel to $25.75 per cwt.

In its initial look into 2023, the USDA projected milk production at 229.5 billion pounds, up about 1.2% from the 2022 estimate.

Prices were forecast lower for all products. Annual average price projects for 2023 were: Class III – $20.50 per cwt, Class IV – $21.40 per cwt and all-milk – $23.55 per cwt.

Beef production, price outlooks revised

The 2022 beef production estimate was raised from the previous month, with more cattle placed in feedlots sooner than normally expected due to drought conditions and supporting higher annual fed cattle slaughter. Additionally, cow slaughter is forecast higher. Forecast fed cattle prices were raised slightly from last month. The USDA estimated 2022 annual average prices for fed cattle at about $140 per cwt, about $18 more than the 2021 average of $122.40 per cwt.

For 2023, beef production was forecast lower with expected declines in both fed and non-fed cattle supplies. The USDA estimated 2023 annual average prices for fed cattle at about $150 per cwt.

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Corn price forecast raised, soybean meal lowered

The WASDE report also provided feed supply and demand estimates and cost projections:

  • Corn: This month’s 2022-23 U.S. corn outlook called for lower production and ending stocks, combining to push prices higher. The very slow start to this year’s planting in the major corn-producing states and the likelihood that progress by mid-May will remain well behind normal is leading to reduced yield prospects. Total corn supplies were forecast to decline 2.7% to 15.9 billion bushels. At $6.75 per bushel, the projected season-average corn price received by producers was raised 85 cents (14%) from the 2021-22 average of $5.90 per bushel and about $2.22 (49%) more than 2020-21 average of $4.53 per bushel.

  • Soybeans: The 2022-23 U.S. soybean supply and use outlook projected higher supplies, crush, exports and ending stocks. The soybean crop was projected at 4.64 billion bushels, up 5% from last year’s crop, mainly on higher harvested area. The U.S. season-average soybean price received by producers for 2022-23 was forecast at $14.40 per bushel, $1.15 (9%) more than the $13.25 per bushel average for 2021-22 and $3.60 (33%) more than the $10.80 per bushel average in 2020-21. The 2022-23 soybean meal price was projected at $400 per ton, down $20 from the average in 2021-22 but $8 more than the average for 2020-21.

  • Cottonseed: While estimates for 2022 cottonseed production were not provided, the WASDE report said that despite an expected 1 million acre year-to-year increase in U.S. area planted to cotton, the U.S. projections for 2022-23 include a smaller crop as acreage abandonment is projected to more than double.

  • Hay stocks: The USDA’s monthly Crop Production report, also released on May 12, provided updates on hay inventories. As of May 1, all hay stored on U.S. farms was estimated at 16.8 million tons, down 7% (1.24 million tons) from the same date a year ago.

Among the 24 major dairy states, on-farm hay inventories were up slightly from a year ago at 9.76 million tons. However, there was a wide variation among individual dairy states: South Dakota hay inventories were down 1.1 million tons compared to a year earlier. In contrast, inventories were larger in Texas (+400,000 tons), Colorado (+350,000 tons), Iowa (+290,000 tons) and New York (+260,000 tons).

Hay disappearance, a proxy for use, totaled 62.2 million tons for the period of Dec. 1, 2021, to May 1, 2022, down 6% from the same period a year earlier.  end mark

Dave Natzke
  • Dave Natzke

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