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USDA sees milk price moving closer to $19 next year

Progressive Dairy Editor Dave Natzke Published on 12 September 2019

Compared to a month ago, the USDA’s September World Ag Supply and Demand Estimates (WASDE) report expects dairy cow numbers to continue to shrink into 2020, but stronger milk output per cow will buffer overall milk production declines. Price projections moved modestly higher for both years.

The 2019 milk production forecast was raised by 100 million pounds compared to last month’s projections, to 218 billion pounds. If realized, 2019 production would be up less than 0.2% from 2018.

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The 2019 all-milk price was forecast at $18.35 per hundredweight (cwt), up 5 cents from last month and up $2.09 per cwt from 2018; it would be the highest annual average since the record high of $23.97 per cwt set in 2014. The projected Class III price was raised 15 cents to $16.45 per cwt, offsetting a 15-cent decline in the Class IV price, to $16.15 per cwt. For 2019, annual average cheese, nonfat dry milk and whey price forecasts were raised slightly, but butter was reduced.

Looking to 2020, the USDA outlook reduced the milk production forecast by another 200 million pounds compared to last month, to 221.2 billion pounds. In part due to an extra day to leap year, the agency forecasts 2020 milk production will rise 1.5% from 2019.

Based on stronger Class III milk prices, the projected average 2020 all-milk milk price was raised a nickel from last month to $18.85 per cwt. Price forecasts for 2020 are: Class III – $17.05 per cwt, up 50 cents from the August forecast; Class IV – $16.15 per cwt, down 30 cents from the previous forecast.

Beef outlook

The forecast for 2019 beef production was reduced from the previous month primarily on slower expected pace of fed cattle slaughter and lighter carcass weights in the fourth quarter.

For 2020, beef production was raised from last month as higher expected first-half 2020 marketings support higher fed cattle slaughter in 2020. First-half carcass weights are also expected to support increased beef production.

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The 2019 average cattle price was projected at $113.50 per cwt, down $3 from last month’s forecast; the 2020 forecast was also reduced. With the year’s highest prices already behind us, weakest prices were forecast in the fourth quarter.

Crop production estimates updated

Along with the WASDE report, the USDA also released its September Crop Production report, updating previous acreage and production estimates.

  • Corn: Corn production for grain is forecast at 13.8 billion bushels, down 1% from the previous forecast and down 4% from last year. Area harvested for grain is forecast at 82 million acres, unchanged from the previous forecast but up less than 1% from 2018.

Based on conditions as of Sept. 1, yields are expected to average 168.2 bushels per harvested acre, down 1.3 bushels from the previous forecast and down 8.2 bushels from 2018. Objective yield data collected in 10 states (Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Nebraska, Ohio, South Dakota and Wisconsin) indicates the lowest number of ears per acre since 2012.

This month’s 2019-20 U.S. corn outlook notes the smaller crop more than offsets larger beginning stocks. However, with corn used for ethanol also reduced, ending stocks are up 9 million bushels from last month.

The projected 2019-20 season-average corn price received by producers is $3.60 per bushel, unchanged from last month’s forecast and equal to the 2018-19 average.

  • Soybeans: Soybean production is forecast at 3.63 billion bushels, down 1% from the previous forecast and down 20% from last year. Area for harvest is forecast at 75.9 million acres, unchanged from the previous forecast but down 14% from 2018.

Based on conditions as of Sept. 1, yields are expected to average 47.9 bushels per harvested acre, down 0.6 bushel from the previous forecast and down 3.7 bushels from 2018. Area harvested for beans is forecast at 75.9 million acres, unchanged from the previous forecast but down 14% from 2018.

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The September objective yield data for the combined 11 major soybean-producing states (Arkansas, Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Ohio and South Dakota) indicates a lower pod count compared with the previous year in 10 of 11 states. The only increase from the 2018 final pod count is expected in Kansas.

Soybean supplies are reduced 2% on lower production and beginning stocks. With soybean crush and exports unchanged, ending stocks are projected at 640 million bushels, down 115 million from last month.

The 2019-20 soybean price received by producers was forecast at $8.50 per bushel, up 10 cents from last month and matching the 2018-19 average. Soybean meal prices are projected at $305 per ton, up $5 from last month’s forecast but $5 less than 2018-19.

  • Cottonseed: The USDA forecast the 2019 cottonseed harvest at 6.77 million tons, down about 200,000 tons from last month’s forecast. Despite the downward adjustment, it would still be but up more than 1.1 million tons from last year and the highest total since 2006.

  • Dry hay: The September report did not update 2019 hay production forecast. Last month, the production of alfalfa and alfalfa mixture dry hay for 2019 was forecast at 55.4 million tons, up 5% from 2018. Harvested area was forecast at 16.8 million acres, unchanged from the June forecast, but up 1% from 2018. Based on Aug. 1 conditions, yields are expected to average 3.29 tons per acre, up 0.12 ton from last year. Record-high yields are expected in Arizona, California, New Mexico and Oregon.

Production of other hay was forecast at 75.7 million tons, up 7% from 2018. Harvested area is forecast at 35.9 million acres, unchanged from the June forecast, but down 1% from 2018. Based on Aug. 1 conditions, the U.S. yield is expected to average 2.11 tons per acre, up 0.15 ton from last year and a new record high, surpassing the previous record of 2.09 tons per acre in 2016.  end mark

Dave Natzke
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