September 5, 2017 at 3:32 p.m.

Projected 2017 milk production up 4.3 billion pounds

By Lee Mielke- | Comments: 0 | Leave a comment

The Agriculture Department again lowered its 2017 and 2018 milk production forecasts from last month in its latest World Agricultural Supply and Demand Estimates (WASDE) report "as lower expected growth in milk per cow more than offsets expected gains in cow numbers."
2017 production and marketings were projected at 216.7 and 215.7 billion pounds respectively, down 200 million pounds from last month. If realized, 2017 production would still be up 4.3 billion pounds or 2.0 percent from 2016.
2018 production and marketings were projected at 221.7 and 220.7 billion pounds respectively, down 300 million pounds from last month. If realized, 2018 production would be up 5 billion pounds or 2.3 percent from 2017.
Fat basis exports for 2017 and 2018 were reduced on the expectation that current high prices will temper demand, but skim-solid basis exports were raised for both years on expected strength in nonfat dry milk/ skim milk powder demand.
The 2017 fat basis import forecast was raised on stronger imports of cheese and butterfat. Lower expected imports of some processed dairy products in 2018 more than offsets higher expected imports of cheese and butterfat, and the forecast for fat basis imports was lowered. The skim-solid basis import forecasts were unchanged.
Cheese, butter, and nonfat dry milk (NDM) price forecasts were raised for both 2017 and 2018 on strong domestic and international demand and a reduced production forecast. Whey prices were reduced for 2017 but raised for 2018.
The 2017 Class III milk price forecast was raised as the cheese price increase more than offsets the lower whey price. Look for a 2017 average of about $16.55 per hundredweight (cwt.), up 20 cents from last month's projection, and compares to $14.87 in 2016 and $15.80 in 2015. The 2018 forecast is for a range of $16.75-$17.75, up 35 cents from last month's estimate.
The Class IV price forecasts reflects higher butter and NDM prices. For 2018, Class prices were raised on higher component product prices. The 2017 Class IV was estimated at about $15.50, up 85 cents from last month's expectation, and compares to $13.77 in 2016 and $14.35 in 2015. The 2018 Class IV average is projected to average $15.25-$16.35, up 85 cents from a month ago.
Projected corn production for 2017/18 was unchanged at 14.1 million bushels, according to the WASDE. USDA will issue its Acreage report June 30, providing a survey-based estimate of corn area planted and a forecast of area harvested for grain. The season average corn price received by producers was unchanged from last month at $3.00 to $3.80 per bushel.
This month's U.S. soybean supply and use projections for 2017/18 were little changed from last month. Higher beginning stocks reflect a lower crush projection for 2016/17. Soybean crush for 2016/17 was reduced 15 million bushels to 1.9 million mainly reflecting reduced domestic soybean meal disappearance. Soybean ending stocks for 2016/17 are projected at 450 million bushels, up 15 million from last month.
Ending stocks for 2017/18 were also raised 15 million bushels to 495 million. Price forecasts for 2017/18 were unchanged. The 2017/18 season-average price for soybeans was forecast at $8.30 to $10.30 per bushel; soybean meal and oil prices were projected at $295 to $335 per short ton and 30 to 34 cents per pound, respectively.
USDA's latest Crop Progress report shows 94 percent of the U.S. corn crop was emerged, as of the week of June 11, up from 86 percent the previous week and 1 percent behind a year ago. Fifty seven percent is rated in good condition, down 1 percent from the previous week and 3 percent behind a year ago.
Ninety two percent of the soybeans are in the ground, with 77 percent emerged, up from 58 percent the previous week and even with a year ago. Ninety two percent of the cotton is planted, up from 80 percent the week before and 5 percent ahead of a year ago.
April American cheese demand was up 2.8 percent from March but down 0.9 percent from a year ago, according to USDA's latest Dairy Outlook. Other cheese demand was down 0.8 percent from March but up 2.8 percent from 2016. Total cheese use was up 0.5 percent from March and up 1.4 percent from a year ago. Nonfat dry milk use gained 0.4 percent in April and butter demand was up 22.8 percent from 2016, according to USDA.
Cash cheese prices languished in butter's shadow Mid-June, especially Wednesday when the shining star of the "Milky Way" shot up 12 cents and hit $2.70 per pound. But, the roller coaster plunged Friday when 24 carloads traded hands, dropping 14 1/2-cents, to close at $2.56, still 8 1/2-cents higher on the week and 19 1/4-cents above a year ago when it jumped almost 17 cents and peaked for the year at $2.3675. A total of 49 cars sold on the week at the CME.
FC Stone's Brendan Curran wrote in his June 14 Insider Opening Bell "The international (butter) market remains on fire and driving prices here, which could have lasting effects if some of the shortages we're hearing of come to fruition."
HighGround Dairy points out that EU butter prices are quickly approaching the $3.00 per pound level and look poised to test the CME all-time high from September 2015 of $3.14 per pound.
USDA's latest Livestock, Dairy and Poultry Outlook reported that export prices of foreign competitors have strengthened significantly in recent weeks, especially for Europe. For the two weeks ending June 9, European export prices for butter and skim milk powder were $2.68-$2.80 and $0.99-$1.07 per pound, respectively. "At the midpoints of the ranges, these prices were 49 cents and 15 cents higher, respectively, than the European export prices reported for the two weeks ending May 12."
Butter sales are strong according to Central producer's reports to Dairy Market News (DMN). With only slight exceptions, retail butter demand has outperformed expectations for the past month. Contacts suggest the butter market is healthy and there is little reason to expect a slowdown in the near term. Domestic buyers are reportedly not covered for the second half of the year, therefore sales may continue to climb and cream headed for the churns is tightening somewhat, as the weather continues to heat up.
Western butter demand is also strong. End users, uneasy about possible higher future prices, seem willing to pay more in the short term to assure coverage of butter needs for the second half of the year. Milk fat supplies are getting tighter and ice cream and other Class II manufacturers are pulling large volumes of cream away from the churns. A lot of milk fat is also getting tied up in cheese production, however cream is still available, says DMN.
Cash block Cheddar held at $1.63 per pound for five consecutive sessions, then lost a penny and a half Friday, and closed at $1.6150, down the third week in a row, but still a dime above a year ago. The barrels finished at $1.38, lowest price since March 29, 2017, down 3 1/2-cents on the week, 16 1/2-cents below a year ago, and an unsustainable 23 1/2-cents below the blocks. Two cars of block traded hands on the week at the CME and 46 of barrel.
Milk remains available for cheese production in the Midwest, according to DMN, and reported spot loads ranged from $2.50 to $6.50 under Class III. Some situationally discounted spot loads headed to the vats as well, as thunderstorms caused power outages at some milk production facilities early in the week. Cheese production continues to match milk intakes, and building inventories remain a concern for some Midwestern cheese producers.
Western cheese output is also ongoing and additional milk is available as most educational institutions are closed for the summer. Cheese inventories are currently high, mostly for mozzarella. Demand is strong and steady but the recent decrease in the CME price has some buyers expecting prices to continue to slip. A number of contacts suggest that export opportunities to Asia are increasing due to U.S prices being below international market prices.
Cash Grade A nonfat dry milk closed the week at 91 cents per pound, up a quarter-cent and 6 3/4-cents above a year ago, with 14 sales on the week.
California's July Class I milk prices climbed to $18.45 per cwt. for the north and $18.72 for the south, highest levels since March 2017 and the highest July price since 2014. Both are up $1.46 from June and $3.58 above July 2016.
The 2016 Class I average now stands at $17.77 for the north, up from $15.64 at this time a year ago and compares to $17.86 in 2015. The southern average, at $18.04, compares to $15.37 a year ago and $17.59 in 2015.
Cooperatives Working Together (CWT) accepted six requests for export assistance this week from members to sell 548,951 pounds of cheese to customers in Asia and Oceania. The product was contracted for delivery through September and puts CWT's 2017 exports at 38.26 million pounds of American-type cheeses, and 3 million pounds of butter (82 percent milkfat) to 17 countries.
Speaking of exports, the U.S. and China this week signed a "Memorandum of Understanding" that will "increase access to China for more than 200 U.S. dairy exporters in the short-term and pave the way for additional U.S. entrants in the future," according to a press release from the U.S. Dairy Export Council (USDEC). "The action creates new, sizeable opportunities for dairy farmers and processors, and the milk, cheese, infant formula and ingredients they produce."
In politics; dairy farmers from across the country visited Capitol Hill this week as part of National Milk's annual young farmer fly-in. A NMPF press release stated that more than 70 farmers from 21 states visited House and Senate members and highlighted four priority issues, including the need to improve the structure of USDA's dairy Margin Protection Program, "which currently is not providing an adequate economic safety net for farmers."
The second priority is the Dairy Pride Act, which would "require the U.S. Food and Drug Administration to enforce existing food standards specifying that dairy terms such as milk, cheese, yogurt and ice cream should only be used by foods made from real milk."
Third is "The importance of a balanced approach to trade policy, especially as the 24-year-old NAFTA agreement is renegotiated by the U.S., Canada and Mexico," and lastly is "the need to reform immigration laws in a manner that helps preserve the existing agricultural workforce and allows for the future flow of dairy farm workers."
NMPF's Board of Directors voted unanimously Wednesday to support modernizing the NAFTA agreement "in a way that enhances and protects the United States" current dairy market access opportunities and addresses Canada's constant use of trade-distorting measures.
NMPF and the USDEC also pledged to work with the Trump Administration to "modernize" the NAFTA, "to make sure it safeguards open trade with Mexico and confronts increasingly protectionist dairy policies by Canada," according to a joint press release.
In joint comments sent to the U.S. Trade Representative, the two groups described the existing North American dairy landscape as "one in which U.S. dairy products flow relatively unhindered to Mexico but are curtailed by Canada's increasing use of policy tools violating international trade obligations."
"NAFTA has accomplished a great deal over the past two-plus decades, but it has also been overtaken by new, unanticipated forms of trade and trade problems," said Tom Vilsack, U.S. Dairy Export Council president and CEO. "We agree that NAFTA could use a facelift and our industry looks forward to working with the Trump Administration to explore ways to preserve and strengthen it."
NMPF president and CEO Jim Mulhern said "The relationship between the dairy sectors of the U.S., Mexico and Canada is of such great importance to all of our nations that we need to devote the time and effort to make it better. A modernized NAFTA agreement must preserve the open and dependable trade relationship with Mexico, and remove remaining barriers to trade that were not adequately addressed in the original agreement."
The International Dairy Foods Association (IDFA) added that "Maintaining the U.S. dairy industry's export market in Mexico is the number one priority for the when U.S. negotiators begin efforts to modernize and update the NAFTA."
In comments filed with the Office of the U.S. Trade Representative, IDFA urged negotiators to "push for greater market access to Canada by addressing the oppressive and expanding policies that limit U.S. dairy exports to that market."
"Other areas in need of modernizing under the 23-year-old pact, IDFA said, include protections for common food names, enhanced sanitary and phytosanitary measures, enforcement guidelines for rules of origin and the removal of duty drawback restrictions that impede fair competition."
Lastly, lawmakers their families, staff, and others were treated this week to the 35th Annual Capitol Hill Ice Cream Party. Ice cream, frozen yogurt and 6,000 root beer floats were served, sponsored by the International Ice Cream Association, the Milk Industry Foundation and the National Cheese Institute, constituent organizations of the International Dairy Foods Association.[[In-content Ad]]


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