Because of “slower growth in milk per cow,” the USDA lowered its 2017 milk production forecast in its latest World Agricultural Supply and Demand Estimates report. And, in its first look to 2018, milk output was forecast higher on “stronger milk prices and moderate feed prices.”

 

2017 production and marketings were projected at 216.9 billion and 215.9 billion pounds respectively, down 400 million pounds from last month. If realized, 2017 production would still be up 4.5 billion pounds, or 2.1 percent, from 2016.

 

2018 production and marketings were projected at 222 billion and 221 billion pounds respectively. If realized, 2018 production would be up 5.1 billion pounds, or 2.4 percent, from 2017.

Commercial exports on fat and skimsolids bases were forecast higher in 2018 on stronger global demand. Fat basis imports were forecast modestly higher in 2018, while skim-solids basis imports were forecast lower relative to 2017. Cheese and non-fat dry milk prices were forecast higher than 2017, but butter and whey prices were forecast lower. An increase in the predicted Class III milk price reflects higher forecast cheese prices offsetting lower whey prices.

Look for the 2017 Class III price to range $16.10-$16.60 per cwt., unchanged from last month’s projection, and compares to $14.87 in 2016 and $15.80 in 2015. The 2018 Class III will range $16.40-$17.40.

The Class IV price is higher as a higher than expected non-fat dry milk price more than offset lower butter prices. The 2017 Class IV will average $14.35-$14.95 per cwt., up a nickel from last month’s estimate, and compares to $13.77 in 2016 and $14.35 in 2015. The 2018 Class IV average should range $14.40-$15.50 per cwt.

Fat basis imports were lowered from the previous month while skim-solids basis imports were increased. Commercial exports were forecast higher for both fat and skim-solids bases.

The report also stated that U.S. feedgrain outlook for 2017/18 is for lower production, domestic use, exports and ending stocks. The corn crop is projected at 14.1 billion bushels, down from last year’s record high with a lower forecast area and yield. The yield projection of 170.7 bushels per acre is based on a weather-adjusted trend assuming normal planting progress and summer weather, estimated using the 1988-2016 time period.

The smaller corn crop is partly offset by the largest projected beginning stocks since 1988/89, leaving total corn supplies down from a year ago but still the second highest on record. Total U.S. corn use in 2017/18 is forecast to decline 2 percent from a year ago as a slight increase in domestic use is more than offset by lower exports.

The 2017/18 outlook for U.S. soybeans is for higher supplies, crush, exports, and ending stocks. The soybean crop is projected at 4.26 million bushels, down 52 million from last year’s record crop with a forecast lower trend yield more than offsetting higher harvested area. With sharply higher beginning stocks, soybean supplies are projected at 4.7 million bushels, up 4 percent from 2016/17.

In politics, Senate Agriculture Committee members got an earful from dairy farmers at a May 6 field hearing held at the Saginaw Valley Research Center in Michigan.

A news release from the National Milk Producers Federation (NMPF) reported that “Dairy farmers in Michigan and across the nation need federal lawmakers to revise the safety net created in the 2014 Farm Bill to provide them adequate risk management protection, according to a dairy farmer from eastern Michigan.”

Darrin Siemen of Harbor Beach, Mich., told lawmakers that the Margin ProtectionProgram (MPP), created in the 2014 Farm Bill, “has failed to deliver the protection farmers need and expect.

“While the MPP remains the right model for the future of our industry, changes are needed if Congress wants to prevent dairy farmers like me from going out of business.”

Siemen said the MPP is designed to help farmers insure against either low milk prices or high feed costs, but the way the program calculates the relative value of feeds such as corn, soybean meal and hay was “significantly changed” as it was written into law.

This change “fundamentally altered the safety net designed by NMPF and other dairy leaders around the country. Unfortunately, as a direct result of these changes, the MPP safety net has failed to deliver the protection farmers need and expect.”

 

He explained that in the first two years of the program, 2015 and 2016, farmers have paid $90 million in fees and premiums to USDA while receiving only $14 million in insurance payouts, even though margins have been tight during much of that period. This led to a drastic reduction in the number of farmers paying premiums to select higher levels of margin protection. Most are now only paying the minimum annual $100 administrative fee, for which they receive only a low level of insurance coverage. 

 

“I am not asking for a program that guarantees a profit, nor do I want a program that will incentivize excess production,” Siemen said. “However, when Congress made changes to the program, rendering it ineffective, dairy farmers like me lost faith in the idea that MPP could serve as a viable risk management tool under its current formulation. If Congress makes changes  to ensure that MPP more accurately reflects the actual costs of production for businesses like mine, participation in the program will increase.”

Cheese: CME cheese prices shot higher the second week of May, and then pulled back some. Cheddar blocks climbed to $1.65 per pound on Thursday, May 11  highest level since Feb. 6, 2017, but closed Friday at $1.6350, up 3.5 cents on the week, after jumping 12 cents the previous week, and are 35.5 cents above a year ago when they bottomed out for the year at $1.28. The barrels closed at $1.53, up 8 cents on the week, 21 cents above a year ago, but 10.5 cents below the blocks. Thirteen cars of block were sold on the week at the CME and 25 of barrel.

Milk remains available for cheese makers in the Midwest, according to Dairy Market News (DMN), and spot milk prices continue to range well under Class

 II. Some contacts reported that milk offers were starting to slow down, and expectations of milk intakes at current prices are nearing their end.

Western manufacturers report steady cheese production as milk supplies are also plentiful and facilities are running at or near full capacity. Contacts say there are large stocks of barrels, but blocks are in better balance. Cheese is generally moving well, and some report that orders are up. A few contacts say retail demand is steady and export opportunities are improving. Domestic demand for American cheese has been a little slow to develop because of unfavorable grilling weather; however, contacts suggest this, too, may be picking up.

Butter: Spot butter rocketed to $2.2625 per pound Friday morning, up 15.5 cents on the week, 22.5 cents above a year ago, and the highest CME price since Jan. 11, 2017. Twenty four cars were sold on the week.

Cream into Class IV manufacturing, which displayed some indications of tightening the first week of May, was readily available the following week. Ice cream producers have yet to pull down the overall cream supply, as weather has been cool and wet in the Central U.S. Retail butter sales were reportedly slower. Some producers are continuing production at steady rates in order to store bulk supplies for later in the year. The market tone is fair but stocks continue to build.

Western butter makers report demand is steady. Some predict a slight increase

in export opportunities over the next few months and are hopeful the additional business can keep inventories in check as butter stocks are heavy and growing.

FC Stone’s Dave Kurzawski asked in his May 11 Early Morning Update: “We know it’s been colder in certain parts of Europe lately, but how do we reconcile EU butter price strength during peak flush?” The next day he stated: “The panic buying of butter this week has been a global phenomenon that may have very well spread into cheese markets” and reported that “SE Asia is knocking on our door.”

Writing in the May 5 Milk Producers Council newsletter, the Daily Dairy Report’s Sarina Sharp pointed out that “The U.S. remains a net butter importer, extending a streak that began in May 2015. March U.S. butter exports totaled 2.6 million pounds, up noticeably from  the previous year’s paltry volumes butwell shy of imports, which totaled 4.1 million pounds. Hopefully, strengthening overseas butter prices and the weakening U.S. dollar will allow for a more meaningful slowdown in butter imports in the months to come,” Sharp says.

Milk: Cash Grade A nonfat dry milk finished at 86.25 cents per pound, up 1.75 cents on the week and 4.75 cents above a year ago, on 11 loads trading hands.

 Dairy demand

 

Checking dairy demand, USDA’s latest commercial disappearance data shows March American cheese use was down 1 percent from February and 1.6 percent below a year ago. Other cheese was up 4.2 percent from February and 0.9 percent above 2016. Total cheese demand was up 2.2 percent from February but fractionally lower than a year ago. Butter demand was up 35.8 percent from February; however, FC Stone points out it was down 4.03 percent on a daily average basis.

March fluid milk consumption also gained some ground. Packaged fluid sales totaled 4.2 billion pounds, up a half-percent from 2016. More details next week.

Meanwhile, the latest Dairy Market Report (DMR) from Dairy Management Incorporated and the National Milk Producers Federation (NMPF) reported that “Fluid milk sales showed the lowest volume decline in almost a year during November 2016 to January 2017.

“American-type cheese consumption continued to outpace that of other cheeses during the same period,” the DMR stated. “American-type cheese exports showed positive growth for the first time in more than a year during December 2016 to February 2017. Dry ingredient product exports continued to grow by double-digit percentages during the same period, as they have since the second half of 2016.”

USDA’s latest National Milk Cost of Production report shows March total milk production costs were close to the previous month but below those a year ago.

Total feed costs averaged $10.26 per cwt., up 9 cents from January, up 14 cents from February, but 39 cents below March 2016. Purchased feed costs, at $5.69 per cwt., were down 6 cents from January, a penny below February and 21 cents below March 2016.

Total costs, including feed, bedding, marketing, fuel, repairs, hired labor, taxes, etc., at $21.71 per cwt., were down 20 cents from January, down a penny from February, and 20 cents below a year ago.

 

Feed costs made up 47.3 percent of total costs in March, up from 46.7 percent the month before and down from 8.6 percent a year ago.

The latest Crop Progress report shows 47 percent of the U.S. corn crop was in the ground as of the week of May 7, up from 34 percent the previous week, down from 61 percent a year ago, and 5 percent behind the five-year average. Rainy weather has kept farmers out of the field in some parts of the Midwest.

Fourteen percent of soybeans are planted, up from 10 percent the previous week, 7 percent behind of a year ago and 3 percent behind of the five-year average.

Twenty one percent of the cotton is in the ground, up from 14 percent the week before, 4 percent behind a year ago and 4 percent behind the five-year average.

Cooperatives Working Together (CWT) accepted seven requests for export assistance the week of May 8 from members to sell 1 million pounds of Cheddar and Monterey Jack cheeses and 440,525 pounds of butter to customers in Asia and the Middle East.

The product has been contracted for delivery through August and put CWT’s 2017 exports at 30.7 million pounds of American-type cheeses and 1.9 million pounds of 82 percent milkfat butter to 15 countries.