October 26, 2020 at 6:41 p.m.

USDA raises 2020-21 milk production forecasts

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

    As I reported last week, the Agriculture Department has again raised its 2020 and 2021 milk production forecasts from last month’s estimate, in the World Agriculture Supply and Demand Estimates report (WASDE). The report cited slightly higher cow numbers and a more rapid growth in milk per cow for 2020 and raised the 2021 projection due to a larger herd and higher milk per cow.
    The 2020 fat basis import forecast was unchanged while the export forecast was reduced on lower exports of butterfat products. The skim-solids import forecast was unchanged but the export forecast was reduced on lower dry whey and lactose shipments. Cheese and nonfat dry milk (NDM) 2020 price forecasts were raised from last month while the whey forecast was unchanged. The butter forecast was reduced.
    The Class III milk price forecast was raised on a higher cheese price forecast and the Class IV price forecast was raised, based on a higher expected nonfat dry milk price more than offsetting the lower expected butter price forecast.
    The fat basis import forecast for 2021 was unchanged while the fat basis export forecast was lowered on weak global import demand for butterfat products. The skim-solids basis import forecast was unchanged, while the export forecast was raised on expected robust international demand for skim milk powder and whey.
    Looking at the crop side of things; this month’s 2020/21 U.S. corn outlook is for lower production, reduced corn used for ethanol, feed, and residual use, and smaller ending stocks, according to the WASDE.
    The Crop Production report showed corn production at 14.7 billion bushels, down 1% from last month’s forecast but up 8% from 2019. Based on conditions, as of Oct. 1, corn yields are expected to average a record high 178.4 bushels per harvested acre, down 0.1 bushel from the last month’s forecast but up 10.9 bushels from last year. Area harvested for grain was forecast at 82.5 million acres, down 1% from the previous forecast, but up 1% from the previous year. Corn ending stocks were lowered 336 million bushels and the corn price forecast was raised 10 cents to $3.60 per bushel.
    Soybean production was forecast at 4.27 billion bushels, down 1% from last month’s forecast but up 20% from a year ago. Yields are expected to average a record high 51.9 bushels per acre, unchanged from last month’s forecast but up 4.5 bushels from 2019. Area harvested for beans was forecast at 82.3 million acres, down 1% from the previous forecast but up 10% from 2019. Acreage reductions were reported in Kansas, North Dakota, and South Dakota.
    Soybean supplies were forecast at 4.8 billion bushels, down 96 million on lower production and beginning stocks. Soybean exports were raised 75 million bushels on record early-season sales, says USDA, and “With smaller supplies and increased exports, ending stocks were projected at 290 million bushels, down 170 million from last month.” The season-average soybean price was forecast at $9.80 per bushel, up 55 cents, reflecting smaller supplies and higher exports. The soybean meal price was forecast at $335.00 per short ton, up $20.00.
    Cotton production was forecast at 17.0 million 480-pound bales, down less than 1% from what was forecast a month ago and down 14% from 2019. Yields are expected to average 909 pounds per harvested acre, down 1 pound from last month’s forecast but up 86 pounds from 2019.
    StoneX Dairy Group, in its Oct. 12 “Early Morning Update,” said “The interesting part moving forward will be on the demand side for beans. With the decrease in stocks for U.S. beans, the dryness in South America putting a large risk on the crop becomes an even bigger story. China continues its historic buying and a large cut in the South American crop could continue that and propel the soybean rally even more.”
    Dairy farmers already know feed prices have climbed the past two months and nothing in these reports offers much hope prices will head down any time soon. The high milk prices are keeping cows in the herd however. In the week ending October 3, 57,800 dairy cows were sent to slaughter, down 1,000 from the week before and 6,400 head or 10% below a year ago.
    Meanwhile, the latest Crop Progress report showed 94% of U.S. corn was at the mature stage, as of the week ending October 11, up from 69% a year ago and 7% ahead of the five year average. 61% is rated good to excellent, up from 55% a year ago. 41% is harvested, up 21% from a year ago and 9% above the five year average.
    The report shows 93% of U.S. soybeans are dropping leaves, up from 81% a year ago and 3% ahead of the five year average. 63% were rated good to excellent, up from 54% a year ago, with 61% now harvested, up from 23% a year ago, and 19% ahead of the five year average.
    The cotton crop has a 40% good to excellent rating, up from 38% a year ago, with 26% harvested, 4% behind a year ago and 1% behind the five year average.
    CME block Cheddar closed the Columbus Day Week at $2.72 per pound, up 7.25 cents on the week, highest since July 15, and 75.25 cents above that week a year ago.
    The barrels keep trying to close the price gap and saw their Friday close at $2.2050, up 15 cents, following a 10 cent jump the previous week and 29.5 cents the week before that, and are 20.50 cents above a year ago. The spread slipped to a still too high 51.5 cents. There were only four cars of block that exchanged hands on the week at the CME and 2 of barrel.
    Lots of eyes are on cheese prices but, off in the not too distant future lies the end of the government’s Food Box program and, as the Dairy and Food Market Analyst (DFMA) warned; “Hundreds of million pounds of milk per month will be searching for a home.”
    DFMA editor and analyst, Matt Gould, talked about the latest commercial disappearance data in view of current high dairy prices in the October 19 “Dairy Radio Now” broadcast. He pointed out that the data looks backward from present reality.
    The latest USDA data is from August, he said, when butter disappearance was down about 9.5%, which followed a 3.6% fall the month before. American type cheese disappearance was down 3.3%, according to Gould, “So if you looked at current price movements you’d be saying demand must be flying off the charts.” It likely is right now, he said, but when you look back at the end of summer when kids were not going back to college etc., demand was anything but normal.
    As to the near all-time record high cheese prices we are seeing, Gould says you can’t ignore the government’s intervention in the marketplace in the form of the Food Box program. People do not fully appreciate how much Uncle Sam has been buying through that program, he said, a figure he calculates at about 4% of the U.S. milk supply. And, when it comes to cheese specifically, he believes that percentage is closer to 7, 8% or even more, of all the cheese made in the U.S.
    Retail sales are not the biggest demand driver of dairy products, according to Gould, prompting the question, if the Food Box program is not renewed after October 31, will holiday demand step in to make up the difference. Gould says no one has the answer but “that would be a tall order.”
     Cheese producers continue to report busy schedules, according to Dairy Market News. Mid-week spot milk prices remained similar to the previous week’s prices, but the potential was there for offers under Class, says DMN.
    Demand for some producers has been a little quieter as cheese prices pushed higher, leaving some customers on the sidelines, according to DMN. That said however, contacts suggest that “regardless of market prices, buyers will return out of necessity as pipelines dwindle.”
    Western cheese manufacturers are running facilities at or above design capacity, as milk is plentiful. In some cases, cheese makers would like to ease back a bit, according to DMN, “but market conditions make this hard to do.” Contacts say demand is active with consistent pulls from retail and the Food Box program. Pizza cheese demand is also solid but most food service and specialty cheese accounts are weaker than previous years. Some contacts are concerned that the current higher market prices won’t last. Futures prices are trailing cash prices and market participants suggest these should converge. Some see a slowing of domestic and export sales as buyers shy away from the higher prices.
    Butter strengthened on the week, closing 9.75 cents higher, at $1.51 per pound, but was 60.50 cents below a year ago. There were 21 cars sold on the week.
    Butter schedules are busier, says DMN. Cream is still available, especially for those looking for it from the West and or those using internally sourced supplies. Expectations of cream shortages were short-lived or have yet to happen. Retail customers are busy but food service continues its slow incline week after week. Butter market tones remain softer, according to DMN.
    Western retail butter demand is fueling both active ordering and lingering nervousness from those concerning yearend availability. Some retailers project a 20% jump in holiday sales and weekly features. Demand is steady to good for print butter and bulk sales are gaining traction. Not as much can be said about food service demand, as sources point out that markets are limited by COVID-19, wildfires, and demonstrations. Supplies are sufficient, as ice cream backs off from cream purchasing, but fresh cream is now being retained for heavy cream products ahead of Thanksgiving.
    Grade A nonfat dry milk jockeyed some but closed Friday at $1.14 per pound, up 1.50 cents on the week but 3 cents below a year ago, with 22 carloads finding new homes on the week.
    Global powder demand has been strong, says StoneX, and “has kept domestic supplies in check but with exports lower than expected and a COVID demand story that still brings uncertainty, it seems like NFDM could have some limited upside.”
    Dry whey saw little movement on the week, closing at 38.75 cents per pound, 0.75 cents lower, but 10.25 cents above a year ago, with 2 sales on the week.
    Cooperatives Working Together (CWT) members accepted six offers of export assistance this week to help capture sales of 304,238 pounds of Cheddar and Monterey Jack cheese, and 158,733 pounds of butter.
    The product is going to customers in Asia from December through February 2021 and raises CWT’s 2020 exports to 26.31 million pounds of American-type cheeses, 8.44 million pounds of butter (82% milkfat), 1.98 million pounds of anhydrous milkfat, 5.9 million pounds of cream cheese, and 35.0 million pounds of whole milk powder. The product is going to 29 countries in seven regions and are the equivalent of 788.5 million pounds of milk on a milkfat basis.
    In politics, Laurie Fischer, CEO of the Wisconsin-based American Dairy Coalition (ADC), issued an editorial warning for dairy producers this week. She referenced the Animal Agriculture Alliance report, outlining observations from the “Taking Action for Animals Conference,” which took place September 19-20.
    “The event, featuring speakers from the Humane Society of the United States (HSUS), Humane Society International, and the Humane Society Legislative Fund, stressed the need for attendees who pride themselves as animal activists to become highly engaged in changing current legislation throughout the U.S. by working directly with legislators to pursue ‘animal-friendly’ legislation in federal, state, and local government levels.”
    Attendees were urged by HSUS leadership, says Fischer, to “become one of the ‘go-to people’ in the legislator’s district, who he or she will reach out to when they have a question about animal protection.”
    “HSUS is deceitful, preying on emotions and the good intentions of Americans to fund the HSUS agenda of ending animal agriculture and putting farmers out of business,” Fischer charged. “According to HumaneWatch, ‘HSUS raises millions of dollars from American animal lovers through manipulative advertising.’ However, HSUS doesn’t run a single pet shelter and only gives 1% of the money it raises to pet shelters while sucking money out of local communities. HSUS’s own donors and local shelters feel wronged.”
    “Animal activists, who intend to end animal agriculture, are using this new strategy to position themselves to provide direct input on the policies which regulate how you operate your dairy operation,” Fischer concludes. “It is more important than ever to ensure you have a strong relationship with your officials at all levels of government, regardless of their political affiliation. Your legislator must hear directly from you to better understand the care you provide to your animals, the methods that keep your employees and the environment safe, and the direct contribution your hard work provides to the economy and to your local community. We cannot let those who wish to end animal agriculture have a stronger voice than us regarding agriculture legislative policy.”
    “These same activists are blaming animal agriculture for the pandemic and destroying the ‘livability’ of our planet. While activists accuse farmers of ruining the environment, dairy and livestock producers are hard at work growing and raising quality, affordable and safe food to nourish families across the nation.”


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