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Milk price outlook improves on further production cuts

Progressive Dairy Editor Dave Natzke Published on 12 August 2019

The USDA’s latest milk production forecasts for both 2019 and 2020 were reduced, based on expectations of a smaller dairy herd and slower growth in milk per cow. As a result, price projections were increased slightly for 2019, with further improvement in 2020, based on USDA’s monthly World Ag Supply and Demand Estimates (WASDE) report, released Aug. 12.

The 2019 milk production forecast was cut by 300 million pounds compared to last month’s projections, to 217.9 billion pounds. If realized, 2019 production would be up less than 0.1% from 2018.

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The 2019 all-milk price was forecast at $18.30 per hundredweight (cwt), up 10 cents from last month and up $2.04 per cwt from 2018; it would be the highest annual average since the record high of $23.97 per cwt set in 2014. For 2019, cheese, butter and whey price forecasts were raised. The nonfat dry milk price forecast was reduced on current price weakness and slowing demand.

Looking to 2020, the USDA outlook reduced the milk production forecast by 400 million pounds compared to last month, to 221.4 billion pounds. In part due to an extra day to leap year, the agency forecasts 2020 milk production will rise 1.6% from 2019.

Although down slightly from last month’s forecast, projected average 2020 milk prices are higher than 2019. Price forecasts for 2020 are: Class III – $16.55 per cwt, Class IV – $16.45 per cwt and all-milk – $18.80 per cwt.

Beef outlook

The 2019 beef production forecast was reduced compared to a month ago, primarily due to lighter carcass weights and slower third-quarter steer and heifer slaughter. The 2019 average cattle price was projected at $116.50 per cwt, up $1 from last month’s forecast. The year’s highest prices already behind us; weakest prices were forecast in the third quarter.

Crop production estimates updated

Along with the WASDE report, the USDA also released its August Crop Production report, updating previous acreage estimates muddied by a slow planting season.

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Prevent plant a factor

Agricultural producers reported they were not able to plant crops on more than 19.4 million acres in 2019. This marks the most prevented plant acres reported since USDA’s Farm Service Agency (FSA) began releasing the report in 2007 and 17.49 million acres more than reported at this time last year. Looking at crops that did make it in the ground:

  • Corn: The 2019 corn-planted area for all purposes is estimated at 90 million acres, down 2% from the previous estimate, but up 1% from 2018. Area harvested for grain is forecast at 82 million acres, down 2% from the previous forecast, but up less than 1% from last year. At 13.9 billion bushels, 2019 corn production for grain is forecast to be the fifth-highest production on record for the U.S. The forecasted yield, at 169.5 bushels per acre, is down 4% from last year’s final estimate of 176.4 bushels per acre.

This month’s corn outlook forecasts larger supplies, reduced exports and corn used for ethanol, and greater ending stocks. Exports are lowered reflecting U.S. export competitiveness and expectations of increasing competition from Argentina, Brazil and Ukraine. With supply rising and use falling, ending stocks are up 171 million bushels to 2.2 billion.

The projected 2019-20 season-average corn price received by producers is $3.60 per bushel, down a dime from last month’s forecast and equal to the 2018-19 average.

  • Soybeans: Soybean production was forecast at 3.68 billion bushels, down 19% from 2018. Based on conditions as of Aug. 1, yields were expected to average 48.5 bushels per harvested acre, down 3.1 bushels from 2018. Area harvested is forecast at 75.9 million acres, down 4% from the NASS June Acreage Report and down 14% from 2018. Area planted for all purposes totaled 76.7 million acres, down 4% from the previous estimate and down 14% from 2018.

With lower production partly offset by higher beginning stocks, soybean supplies for 2019-20 were projected at 4.77 billion bushels, down 3% from last month. U.S. soybean exports are reduced 100 million bushels to 1.78 billion reflecting reduced global import demand, mainly for China. Soybean ending stocks are projected at 755 million bushels, down 40 million.

The 2019-20 soybean price received by producers was forecast at $8.40 per bushel, unchanged from last month but 10 cents less than the 2018-19 average. Soybean meal prices are projected at $300 per ton, unchanged from last month’s forecast but $10 less than 2018-19.

  • Dry hay: Production of alfalfa and alfalfa-mixture dry hay for 2019 is forecast at 55.4 million tons, up 5% from 2018. Harvested area is forecast at 16.8 million acres, unchanged from the June forecast, but up 1% from 2018. Based on Aug. 1 conditions, yields are expected to average 3.29 tons per acre, up 0.12 ton from last year. Record-high yields are expected in Arizona, California, New Mexico and Oregon.

Production of other hay is forecast at 75.7 million tons, up 7% from 2018. Harvested area is forecast at 35.9 million acres, unchanged from the June forecast, but down 1% from 2018. Based on Aug. 1 conditions, the U.S. yield is expected to average 2.11 tons per acre, up 0.15 ton from last year and a new record high, surpassing the previous record of 2.09 tons per acre in 2016.

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  • Cottonseed: The USDA forecast the 2019 cottonseed harvest at 6.969 million tons, up more than 1.3 million tons from last year. If realized, it would be the highest total since 2006.  end mark
Dave Natzke
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