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USDA dairy outlook more bullish; hay inventories lower

Progressive Dairyman Editor Dave Natzke Published on 10 May 2019

If the latest USDA projections hold true, U.S. dairy farmers could see the 2019 all-milk price top $18 per hundredweight (cwt), the first time that’s happened since 2014.

Citing declining cow numbers and slowing growth in milk output per cow, the USDA trimmed its 2019 milk production forecast substantially. The agency’s monthly World Ag Supply and Demand Estimates (WASDE) report, released May 10, also raised projected cheese and nonfat dry milk prices, providing support for milk prices.

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The 2019 milk production forecast was reduced about 800 million pounds from last month’s estimate to 218.7 billion pounds. If realized, 2019 production would be up just 0.5 percent from 2018.

The projected 2019 average cheese price was raised 7 cents per pound to $1.65 per pound, and nonfat dry milk is now predicted to average just over $1 per pound this year. Annual average prices for butter ($2.29 per pound) and whey (39.5 cents per pound) were unchanged from last month’s forecast.

As a result, the USDA projected the 2019 Class III milk price at $16.05 per cwt, up $1.44 per cwt from 2018. The 2019 projected Class IV price was raised to $16.20 per cwt, up $1.97 per cwt from 2018. The 2019 all-milk price was forecast at $18.05 per cwt, up $1.79 per cwt from 2018 and the highest average since the record high of $23.97 per cwt set in 2014.

For what it’s worth, the USDA also issued the first projections for 2020. With the higher milk prices and lower feed costs in 2019 (plus one extra day due to leap year), the agency forecasts 2020 milk production will jump 1.8 percent from 2019 to 222.7 billion pounds.

However, despite the increase in production, 2020 cheese, butter and nonfat dry milk prices were all projected higher on the strength of robust demand. Only the dry whey price is expected to weaken slightly. Initial price forecasts for 2020 are: Class III – $16.55 per cwt, Class IV – $16.80 per cwt and all-milk – $18.80 per cwt.

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Looking at the WASDE report’s beef and feed situation and forecast:

• Beef cattle: The 2019 beef production forecast was mostly steady compared to a month ago. The 2019 average cattle price was projected at $118.50 per cwt, with highest prices already behind us for the year.

• Corn: Despite continued planting delays, this month’s 2019-20 U.S. corn outlook is for larger production, as an increase in acreage more than offsets a reduction in yield. With the total U.S. corn supply rising more than use, 2019-20 U.S. ending stocks are expected to be the highest since 1987-88. The projected 2019-20 season-average corn price received by producers is $3.30 per bushel, down 20 cents from 2018-19 and the lowest since 2006-07.

• Soybeans: Starting the year with high beginning stocks, the 2019-20 outlook for U.S. soybeans is for higher supplies and use, with slightly lower ending stocks compared to 2018-19. The soybean crop is projected at 4.15 billion bushels, down from last year’s record crop due to lower harvested area and trend yields. The 2019-20 soybean price was forecast at $8.10 per bushel, below the $8.55 per bushel average in 2018-19. The 2019-20 soybean meal price was projected at $290 per ton, down from $305 per ton in 2018-19.

• Cottonseed: Although acreage planted to cotton is anticipated lower, less drought-induced acreage abandonment is forecast this year, resulting in a larger cotton crop. Private estimates suggest the 2019-20 cotton crop could reach 23 million bales, which translates to an almost 8 million ton cottonseed crop, according to Nigel Adcock, with Cottonseed LLC. That would be the largest cottonseed yield since 2005.

Spring hay inventories lower in most major dairy states

In addition to the WASDE report, the USDA’s  Crop Production  report, also released May 10, included an update on hay inventories. Hay inventories stored on farms as of May 1, 2019, were the lowest total for that date since 2013.

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All hay stored on U.S. farms on May 1, 2019, totaled 14.9 million tons, down 3 percent (442,000 tons) from a year ago. The only year hay inventories were lower in the past decade was on May 1, 2013, at 14.1 million tons. This marks the lowest May 1 hay stocks since the drought of 2012 and the second-lowest since USDA records began in 1950.

Multiple factors led to the small hay inventory starting the new growing season, including a smaller hay harvest in 2018, large dairy and beef cattle numbers and a long winter that increased the need for supplemental hay feeding. Hay “disappearance,” a measure of use, totaled 64.1 million tons from Dec. 1, 2018, to May 1, 2019. While down from the year before, the smaller harvest in 2018 meant beginning stocks were lower. Hay stocks on farms as of Dec. 1, 2018, were down 5.3 million tons compared to a year earlier.

051019 natizke hay stocks

Among the 23 major dairy states (Table 1), May 1 hay inventories compared to a year earlier were down in 12, led by Colorado (-400,0000 tons), Minnesota (-280,000 tons) and Idaho (-260,000 tons). Inventories were also down 150,000 tons or more in Kansas, Oregon, Pennsylvania and Wisconsin. May 1, 2019, hay stocks were record lows in Minnesota, New Hampshire, Rhode Island and Wisconsin.

Biggest year-to-year increases in May 1 hay inventories among major dairy states was in Texas (+390,000 tons) and California (+120,000 tons).  end mark

Dave Natzke
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