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USDA reduces milk production forecast, boosts projected prices

Progressive Dairyman Editor Dave Natzke Published on 11 May 2018

The USDA’s May World Ag Supply and Demand Estimates (WASDE) report reduced 2018 milk production projections and offered a slightly better price outlook for the year.

Citing lower milk cow numbers and slow growth in milk per cow, the 2018 milk production estimate was cut 300 million pounds from last month’s forecast, to 218.7 billion pounds. If realized, it would be up 1.5 percent from 2017. The USDA’s April 2018 Milk Production report will be released May 18.

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Based on current estimates, USDA raised 2018 projected average prices (midpoint of range) compared to a month ago: Class III – $15.05 per hundredweight (cwt), up from $14.45 per cwt; Class IV – $14.05 per cwt, up from $13.55 per cwt; and all-milk – $16.45 per cwt, up from $15.85 per cwt. Those averages would be down from 2017, but are now higher than prices seen in 2016.

In its first milk production forecast for 2019, the USDA said milk production would rise to 221.5 billion pounds, up 1.3 percent from the level forecast for 2018. Cow numbers are expected to remain near 2018 levels. In its first price projections for 2019, the USDA forecast (midpoint of range) Class III – $15.30 per cwt; Class IV – $14.20 per cwt; and all-milk – $16.75 per cwt.

Beef outlook

The USDA lowered its 2018 beef production forecast, but left price projections unchanged. Cattle slaughter in the second quarter has been slower than anticipated, and the pace of marketings in the second half of the year is also expected to be slower. However, carcass weights are expected to increase in the second half of the year, partly offsetting the reduction in the slaughter forecast. Highest cattle prices for the year are already behind us.

The USDA also offered its first beef outlook for 2019. Beef production is forecast above 2018, based on higher cattle slaughter and heavier carcass weights. Larger beef supplies and firm global demand are expected to support stronger U.S. beef exports relative to 2018, helping boost prices.

Feed outlook

On the feed side of the equation, the USDA is already looking ahead to 2018-19 crops.

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The corn crop is projected at 14 billion bushels, down from last year with a lower forecast area and yield. The average yield is projected at 174 bushels per acre. Total U.S. corn use in 2018-19 is forecast to decline modestly. Food, seed and industrial use is projected to rise, driven by an expected increase in the amount of corn used to produce ethanol. Feed and residual use for corn is projected lower.

Marketing year 2017-18 prices paid to corn growers are forecast in a range of $3.25 to $3.55 (midpoint $3.40) per bushel, compared to $3.36 per bushel in 2016-17. The initial prices forecasts for 2018-19 fall in a wide range, $3.30 to $4.30 per bushel.

The 2018-19 outlook for U.S. soybeans is for higher supplies, crush and exports, resulting in lower ending stocks compared to the 2017-18 marketing year. The soybean crop is projected at 4.28 billion bushels, down from last year’s record crop. The U.S. soybean crush for 2018-19 is projected at 1.995 billion bushels, up slightly from the revised 2017-18 forecast, with higher soybean meal disappearance offset by lower projected soybean meal exports.

Projected 2017-18 marketing year average prices paid to growers were estimated at $9.35 per bushel, compared to $9.47 per bushel in 2016-17. Projected soybean meal prices averaged $360 per ton, up more than $40 over the $317-per-ton average in 2016-17. The initial prices forecasts for 2018-19 fall in a range of $330 to $370 per ton.

Hay inventories smaller

In conjunction with the WASDE report, the USDA’s monthly Crop Production report estimated hay inventories stored on U.S. farms as of May 1 were the second-lowest total for that date in the past decade. All hay stored on U.S. farms on May 1, 2018, totaled 15.7 million tons, down 36 percent (8.7 million 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.

A higher U.S. cattle inventory and weather conditions – April snow in the Northern Plains along with dry pasture conditions stretching from the Southwest to the Southern Plains – extended supplemental feeding requirements, further reducing available hay stocks.

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Several dairy states saw some of the sharpest year-to-year declines in hay inventories: Texas stocks were down more than 2 million tons, and Missouri stocks were down 920,000 tons. Elsewhere, South Dakota, Kentucky, Kansas, Wisconsin and Minnesota saw May 1 inventories drop by more than 300,000 tons each. California's hay inventory hit a record low for May 1.

Read Spring U.S. hay inventories small on the Progressive Forage website.  end mark

Dave Natzke
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