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USDA: Milk output forecast raised; smaller harvest boosts feed price projections

Progressive Dairy Editor Dave Natzke Published on 11 September 2020

Compared to a month ago, two USDA reports indicate a slight tightening of dairy income margins for both 2020 and 2021.

The USDA’s September World Ag Supply and Demand Estimates (WASDE) report forecast slightly higher milk production for both 2020 and 2021, with the outlooks for milk prices reduced from last month. Combined with smaller crops forecast in the USDA’s Crop Production report, the agency projected increases in corn and soybean prices for the 2020-21 marketing year.

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More milk per cow

Milk production for 2020 was forecast at 222 billion pounds, up 200 million pounds from last month’s estimate, based on higher expected growth in milk per cow. If realized, it would be up about 1.6% from 2019’s total of 218.4 billion pounds.

Cheese, butter and whey price forecasts were reduced from last month, but the forecast for nonfat dry milk was unchanged. The forecasted 2020 annual average prices for both Class III and Class IV milk were reduced by 15 cents per hundredweight (cwt) to $17.25 and $13.40 per cwt, respectively. As a result, the 2020 all-milk price was projected at $17.75 per cwt, down 20 cents from last month’s forecast.

The USDA price outlook is slightly lower than current Class III and Class IV futures prices for 2020. Using preliminary Chicago Mercantile Exchange (CME) futures prices on Sept. 10, the 2020 Class III price would average about $17.48 per cwt, while the Class IV price would average about $13.65 per cwt.

The trend toward stronger milk output per cow is expected to continue in 2021, and the USDA raised the overall production estimate to 225.4 billion pounds, up 100 million pounds from last month’s estimate. If realized, it would be up about 1.5% from 2020’s estimate.

Like 2020, 2021 price forecasts for cheese, butter and whey were lowered while the nonfat dry milk forecast was unchanged. Projected Class III and Class IV milk prices were cut 5-10 cents to $16 and $13.60 per cwt, respectively. That results in an annual average all-milk price of $17 per cwt in 2021.

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Beef outlook mixed

The 2020 beef production forecast was raised from last month, reflecting increased slaughter rates in the second half of the year. Beef production in 2021 was reduced from last month on lower expected steer and heifer slaughter and lighter carcass weights.

The cattle price forecast for 2020 was unchanged from last month, while the 2021 price forecast was raised on lower production.

Feed outlook: Weather impacts yields

Feed cost projections incorporated supply and demand estimates from the WASDE report, as well as the September Crop Production report.

  • Corn: This month’s 2020-21 U.S. corn outlook was for reduced production, lower corn used for ethanol, larger exports and smaller ending stocks.

Corn production was forecast at 14.9 billion bushels, down 378 million bushels (2%) from last month due to lower yields and reduced harvested area. It would still be the second-largest U.S. corn crop on record. Based on conditions as of Sept. 1, yields were expected to average 178.5 bushels per acre. While still a record high, it’s down from last month's forecast due to weather concerns and storm damage. Area harvested for grain was forecast at 83.5 million acres, down 1% from the previous forecast but up 3% from last year.

The projected 2020-21 season-average corn price received by producers was raised 40 cents to $3.50 per bushel, but it’s still a dime less than the 2019-20 marketing year average.

  • Soybeans: This month’s U.S. soybean supply projections for 2020-21 include lower beginning stocks, production and ending stocks.

Soybean production was forecast at 4.31 billion bushels, down 3% from the previous forecast but up 21% from last year. Based on conditions as of Sept. 1, yields were expected to average a record high 51.9 bushels per harvested acre, down 1.4 bushels from the previous forecast but up 4.5 bushels from 2019. U.S soybean acreage was forecast at 83 million acres, unchanged from the previous forecast but up 11% from 2019.

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The U.S. season-average soybean price received by producers for 2020-21 was estimated at $9.25 per bushel, up 90 cents from last month’s forecast and about 70 cents more than the 2019-20 average. The projected soybean meal price was raised $25 from last month to $315 per ton, which would be $15 more than the 2019-20 average.

  • Hay: The monthly Crop Production report did not update hay production estimates.

  • Cottonseed: With a reduction in both cotton acreage and yield, the 2020 cottonseed crop was estimated at 5.22 million tons, down about 5% from last month’s forecast and down 722,000 tons (12%) from 2019. If realized, it would be the smallest cottonseed harvest since 2015.  end mark
Dave Natzke
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