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USDA outlook reduces milk production estimates, forecasts better margins

Progressive Dairy Editor Dave Natzke Published on 10 September 2021

The USDA’s latest World Ag Supply and Demand Estimates (WASDE) report, released Sept. 10, reduced both 2021 and 2022 milk production forecasts slightly on expectations of lower cow numbers and slower growth in milk output per cow. Combining slightly stronger milk price projections with declining feed prices, the report suggests dairy income margins should improve off the extremely low levels this summer.

For 2021, the USDA forecasts milk production at 227.8 billion pounds, down 300 million pounds from last month’s estimate. If realized, 2021 production would be up about 2% from 2020.

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Looking into next year, 2022 milk production was forecast at 230.6 billion pounds, down 600 million pounds from last month. If realized, 2022 production would be up about 1.2% from the 2021 forecast.

For 2021 and 2022, butter, cheese and nonfat dry milk price forecasts were raised on improving demand and lower production. The whey price forecast was unchanged for both years.

Carried back to the farm gate, the projected 2021 Class III milk price was raised a dime to $16.65 per hundredweight (cwt), with the Class IV price forecast at $15.55 per cwt, up 40 cents from last month. Based on those averages, the 2021 all-milk price was forecast higher at $18.15 per cwt, up 20 cents from last month.

In 2022, the Class III milk price was raised 30 cents to $16.45 per cwt, with the Class IV price projected 75 cents higher at $16.05 per cwt. The all-milk price forecast for 2022 is $18.40 per cwt, up 55 cents from a month ago.

Beef price outlook improves

The 2021-22 beef production forecast was reduced from last month as lower expected steer and heifer slaughter and lighter carcass weights more than offset higher cow slaughter. As a result, projected fed cattle prices were raised for both years based on current price strength and firm demand. The projected annual average fed cattle price for 2021 was raised $1 from last month to about $122 per cwt, up almost $14 from the 2020 average. The price outlook for 2022 was raised to $128 per cwt.

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Feed price outlook lowered

In addition to WASDE supply and demand estimates, feed supply and cost projections, the USDA also released the September Crop Production report, updating 2021 yield and production estimates. Here’s a summary:

  • Corn: Compared to a month ago, the 2021-22 U.S. corn outlook calls for larger supplies, increased feed and residual use, greater exports and higher ending stocks.

Boosting the outlook for both harvest area and yield, the Crop Production report forecasts the 2021 corn harvest at 15 billion bushels, up 2% from the previous forecast and up % from 2020. Based on conditions as of Sept. 1, yields are expected to average 176.3 bushels per harvested acre, up 1.7 bushels from the previous forecast and up 4.3 bushels from last year. Area harvested for grain is forecast at 85.1 million acres, up 1% from the previous forecast and up 3% from the previous year.

At $5.45 per bushel, the projected season-average corn price received by producers was cut 40 cents from last month. That would be about $1 (22%) more than the 2020-21 average of $4.45 per bushel and $1.89 (53%) more than the 2019-20 average of $3.56 per bushel.

  • Soybeans: The 2021-22 U.S. soybean supply and use outlook forecasts higher beginning stocks, production, exports and ending stocks, with a lower crush.

Soybean production was forecast at 4.37 billion bushels, up 1% from the previous forecast and up 6% from 2020. Based on conditions as of Sept. 1, yields are expected to average 50.6 bushels per harvested acre, up 0.6 bushel from the previous forecast and up 0.4 bushel from 2020. Area harvested for beans was forecast at 86.4 million acres, down less than 1% from the previous forecast but up 5% from 2020.

At $12.90 per bushel, the projected U.S. season-average soybean price received by producers would be down 80 cents from last month’s forecast but would be up $2 (18%) from the 2020-21 average of $10.90 per bushel and $4.33 (51%) more than the 2019-20 average of $8.57 per bushel. The projected soybean meal price was forecast at $360 per ton, down $25 from the previous month. If realized, it would be down $35 from the 2020-21 average but still up more than $61 per ton from 2019-20.

  • Cottonseed: The Crop Production report forecast a larger cotton crop, with higher yields offsetting a decline in acreage. The 2021 cottonseed crop is now forecast at 5.645 million tons, up about more than 1.1 million tons (25%) from 2020.

  • Dry hay: The September Crop Production report did not provide an update on the 2021 dry hay harvest.  end mark
Dave Natzke
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