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Economic Update: USDA raises 2022 milk production and price forecasts

Progressive Dairy Editor Dave Natzke Published on 08 April 2022

Update highlights

USDA raises 2022 milk production and price forecasts

The USDA’s monthly World Ag Supply and Demand Estimates (WASDE) report, released April 8, revised the 2022 U.S. milk production estimate upward, citing expected growth in cow numbers. Despite the production increase, the outlook for farm-level milk prices improved.

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Compared to last month, the USDA raised the milk production forecast by 300 million pounds to 226.3 billion pounds. If realized, 2022 production would be unchanged from 2021.

Price forecasts for cheese and butter were raised from the previous month on tighter stocks and firm demand. Nonfat dry milk prices were raised fractionally, while whey prices were lowered, as U.S. prices are expected to become competitive with international prices.

With the higher cheese price more than offsetting a lower whey price, the projected annual average Class III price was raised $1.10 from last month to $22.75 per hundredweight (cwt). The projected Class IV price was raised 35 cents to $24.05 per cwt. The 2022 all milk price forecast was increased to $25.80 per cwt, up 75 cents from last month.

Looking at other components of the WASDE report:

  • Beef production outlook raised. The 2022 beef production estimate was raised from the previous month on higher expected first-quarter placements, supporting larger fed cattle slaughter, and more non-fed cattle slaughter is expected. Forecast fed cattle prices were unchanged from last month. The USDA estimated 2022 annual average prices for fed cattle at about $139.50 per cwt, $17 more than the 2021 average of $122.40 per cwt.

  • Corn price forecast increased: This month’s 2021-22 U.S. corn outlook called for offsetting changes to feed and residual use and corn used for ethanol production, with unchanged ending stocks. At $5.80 per bushel, the projected season-average corn price received by producers was raised 15 cents from last month. That would be about $1.27 (28%) more than 2020-21 average of $4.53 per bushel and $2.24 (63%) more than the 2019-20 average of $3.56 per bushel.

  • Soybean, meal prices unchanged: The 2021-22 U.S. soybean supply and use outlook projected increased exports and seed use and lower ending stocks. The U.S. season-average soybean price received by producers for 2021-22 was forecast at $13.25 per bushel, unchanged from last month but $2.45 (23%) more than the average for 2020-21 and $4.68 (55%) more than the $8.57 average in 2019-20. The soybean meal price was projected at $420 per short ton, also unchanged from last month but nearly $28 (7%) more than the average for 2020-21 and $120.50 (40%) more than the 2019-20 average.

GDT price index lower

The latest Global Dairy Trade (GDT) auction saw the overall index decline slightly with individual commodity prices mixed. By category, prices were:

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  • Skim milk powder was up 1% to $4,599 per metric ton (MT, or about 2,205 pounds).
  • Whole milk powder was down 1.5% to $4,532 per MT.
  • Butter was down 0.6% to $6,891 per MT.
  • Cheddar cheese was up 2.7% to $6,472 per MT.
  • Anhydrous milkfat was down 2.5% to $6,908 per MT.

The GDT platform offers dairy products from six global companies: Fonterra (New Zealand), Dairy America (U.S.), Amul (India), Arla (Denmark), Arla Foods Ingredients (Denmark) and Polish Dairy (Poland). The next GDT auction is April 19.

Producer sentiment decline linked to Ukraine impact

The financial outlooks of U.S. agricultural producers fell to a 22-month low in March, weighted down by the economic impacts of the ongoing military conflict in the Ukraine and ongoing supply chain challenges. The decline was driven both by weaker perceptions of current conditions and expectations for the future, as measured in the monthly Purdue University/CME Group Ag Economy Barometer survey.

“When producers think about how their farm will fare financially in 2022, it’s clear they do not expect commodity price strength to offset the dramatic rise in farm production costs they are experiencing,” said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

The Ag Economy Barometer provides a monthly snapshot of farmer sentiment regarding the state of the agricultural economy. The survey collects responses from 400 producers whose annual market value of production is equal to or exceeds $500,000. Minimum targets by enterprise are as follows: 53% corn/soybeans, 14% wheat, 3% cotton, 19% beef cattle, 5% dairy and 6% hogs. Latest survey results, released April 5, reflect ag producer outlooks as of March 14-18.

The March survey provided the first opportunity to ask producers explicitly how they expect war in Ukraine will impact U.S. agriculture. Producers overwhelmingly said they expect input prices to be most affected (63% of respondents), followed by crop prices (33% of respondents) and livestock prices (3% of respondents).

When asked about their expectations for farm input prices in the upcoming year, 57% of producers said they expect farm input prices to rise by 20% or more and 36% said they think input prices will rise by 30% or more. Responding to a related question, just over one-fourth (27%) of producers say they’ve had difficulty purchasing crop inputs for the 2022 crop season.

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Producers do not view this as a good time to make large investments, with plans for farm machinery purchases and farm building/grain bin construction both lower than previous surveys. Supply chain problems continue to haunt both farm machinery and construction investment.

Find an audio podcast discussion of the Ag Economy Barometer here.  end mark

Dave Natzke
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