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USDA forecasts more milk with mixed outlook for prices

Progressive Dairy Editor Dave Natzke Published on 10 June 2021

The USDA’s latest World Ag Supply and Demand Estimates (WASDE) report, released June 10, raised 2021-22 milk production forecasts due to higher cow numbers, with the outlook for prices mixed.

For 2021, the USDA forecasts milk production to reach 228.5 billion pounds, up 600 million pounds from last month’s estimate. If realized, 2021 production would be up about 2.4% from 2020.

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Price forecasts for butter, nonfat dry milk (NDM) and whey were raised from the previous month on recent price strength and stronger anticipated demand. The cheese price forecast was lowered due to relatively large stocks and current prices. The lower forecast cheese price results in a lower projected annual average Class III price ($17.45 per hundredweight [cwt]), but the higher NDM and butter prices result in a higher Class IV price ($15.85 per cwt). The all-milk price forecast was lowered a dime from last month’s forecast to $18.85 per cwt for 2021.

In the USDA’s look ahead to 2022, milk production was forecast at 231.1 billion pounds, up 800 million pounds from last month, as gains in milk per cow and cow numbers continue. If realized, 2022 production would be up about 1.1% from the 2021 forecast.

Butter, NDM and whey price forecasts were raised from the previous month, while the projected cheese price was unchanged. The annual average Class III ($17.15 per cwt) and Class IV price ($15.95 per cwt) forecasts were raised from last month, and the projected all-milk price was raised 25 cents from last month to $18.75 per cwt.

Beef outlook

The 2021 beef production forecast was raised slightly, with higher expected cow slaughter largely offset by lower steer and heifer slaughter. The 2021 projected cattle price was raised $1 from last month at about $117 per cwt, up about $9 from the 2020 average.

Projected corn, soybean costs unchanged

Based on WASDE supply and demand estimates, feed supply and cost projections included:

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  • Corn: This month’s 2021-22 U.S. corn outlook sees reduced beginning and ending stocks compared to a month ago, reflecting increases in corn used for ethanol and exports. At $5.70 per bushel, the projected season-average corn price received by producers would be about $1.35 (31%) more than 2020-21 average of $4.35 per bushel.

  • Soybeans: This month’s 2021-22 U.S. soybean outlook raises beginning and ending stocks compared to a month ago, reflecting a lower crush and a reduction in exports. The projected 2021-22 U.S. season-average soybean price received by producers was unchanged at $13.85 per bushel, up $2.60 (23%) from the 2020-21 average. The projected soybean meal price was forecast at $400 per ton, also unchanged from the previous month. If realized, it would be down $5 from the 2020-21 average but up more than $100 per ton from 2019-20.

Rabobank: Slow production growth ahead

Another major dairy outlook report, this one from Rabobank, was also released recently. It suggests that while worldwide dairy markets are slowly returning to normal from the pandemic-led channel distortion, risks associated with weather and feed prices are likely to limit overall milk production growth. At the same time, demand from China is expected to slow in the second half of 2021.

According to RaboRearch Food and Agribusiness senior analyst Michael Harvey, farmgate milk prices have been on a higher trajectory for most dairy producers throughout the world. Grain and oilseed market prices are reaching near-decade highs, driven by supply concerns from adverse weather in key growing regions combined with strong demand. Although there has recently been some reprieve, feed prices are expected to remain firm well into 2022, pressuring dairy farmer margins.

As a result, Rabobank forecasts milk supply growth for the “Big 7” to expand by just 1% year-on-year through the second half of 2022, below the previous forecast and the long-term historical growth rate.

“Since the last report, there have been two noticeable shifts in the market. Endemic congestion at ports continues to cause shipping delays and higher freight costs, and higher feed prices will linger well into 2022, keeping farmer margins under pressure,” Harvey said.

China’s healthy appetite for imports was visible in the early months of 2021 and has been the primary pillar of price support. Rabobank expects softer year-on-year import volumes in the second half of 2021, and this remains the key demand determinant shaping commodity dairy prices into 2022.

On an annualized basis, the combined exportable dairy surplus will expand in 2021. The heaviest production growth is occurring in the U.S., after a modest flush in Europe. New Zealand is expected to have a good milk production season, with the usual caveats around the weather.  end mark

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Dave Natzke
  • Dave Natzke

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