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WASDE report forecasts more milk per cow for 2015

 

By LEE MIELKE
Mielke Market Weekly 

The USDA lowered its 2014 milk production estimate in its latest World Agricultural Supply and Demand Estimates (WASDE) report, released Oct. 10, from last month on slower growth in milk per cow. However, the 2015 production forecast was raised as growth in output per cow is expected higher with relatively lower-priced feed.

The 2014 production estimate was projected at 206.1 billion pounds, down 200 million from last month’s projections and compares to 201.2 billion in 2013 and 200.6 billion in 2012. If realized, 2014 production would be up 2.4 percent from 2013. The 2015 estimate, at 212.8 billion pounds, is up 300 million from a month ago. If realized, 2015 production would be up about 3.25 percent from 2014.

Export forecasts for 2014 were lowered as U.S. dairy prices are less competitive, but import forecasts were raised as relatively high U.S. prices encourage larger imports. The 2015 trade forecasts were unchanged.

Butter, cheese, and whey prices for 2014 were raised from last month as domestic demand continues to support prices. Prices of these products are unchanged for 2015. However, the nonfat dry milk (NDM) price forecasts for both 2014 and 2015 were reduced as U.S. prices are expected to decline to increase the competitiveness of NDM exports.

The 2014 Class III milk price was raised on stronger cheese and whey prices but was unchanged for 2015. The 2014 average is now expected to range $22.40-$22.50 per cwt., up from the $22.15-$22.35 expected a month ago. The 2015 range is $17.25-$18.15, compared to the $17.20-$18.20 projected last month.

The Class IV price was raised for 2014 as higher butter prices more than offset the decline in NDM prices, but for 2015, the lower forecast NDM price results in a lower Class IV price. Look for the 2014 Class IV to range $22.40-$22.60, up from $22.30-$22.60 projected a month ago. The 2015 average is now put at $17.45-$18.45, compared to the $18.45-$19.55 expected in last month’s report.

Speaking of milk prices, the California Department of Food and Agriculture announced the state’s November Class I milk prices at $24.33 per cwt. for the north and $24.60 for the south. Both are down $1.75 from last month’s record high but are $2.59 above November 2013.

The 10-month average now stands at $24.86 for the north, up from $20.16 at this time a year ago and $18.69 in 2012. The southern average now stands at $25.13, up from $20.43 a year ago and $18.96 in 2012. The November Federal order Class I base price will be announced by USDA on Oct. 22.

Butter in meltdown

Checking the week’s markets, it was a continued meltdown on butter last week as the bleeding turned to hemorrhaging. The spot closed Friday, Oct. 17, at $2.00 per pound, a level not seen since late April 2014, down 80.5 cents on the week (the fourth week of decline), but still 51.75 cents above a year ago. It has plunged $1.06 since it set a new record high of $3.06 on Sept. 19. Five cars traded hands on the week. The NDPSR-surveyed butter price quickly slipped below its record topping $3 last week, to $2.9228, down 9 cents.

Butter prices are falling under pressure from competing global markets, reports USDA’s Dairy Market News (DMN). Given the current situation, churn operators are looking for opportunities to sell excess cream supplies. However, because of declining interest from ice cream and other manufacturers, cream is readily available and selling at discounted rates. Production levels are mixed. Export interest is minimal as U.S. prices are not competitive in the international market.

Butter production is steady to higher in the West. Milk production is trending higher, and butterfat levels are increasing. Cream sales into higher Class items are eroding as fast as the butter price. Additional cream is being churned.

Cash cheese prices were "mixed" to say the least last week. The blocks saw a second week of strength on bids and closed Friday, Oct. 17, at $2.2875 per pound, up 9 cents on the week and an astounding 43 cents above a year ago. The barrels were on a roller coaster, jumping 6.5 cents Tuesday, Oct. 14, but lost 7 cents on Wednesday, a half-cent Thursday, and 2 more cents Friday, Oct. 17, to close at $2.07, down 3 cents on the week, the fourth consecutive week of decline, but 30.75 cents above a year ago. They are also at an unsustainable 21.75 cents below the blocks. Seven cars of barrel traded hands on the week, no blocks. The NDPSR-surveyed U.S. average block price hit $2.3407 per pound, down 4.3 cents, while the barrels averaged $2.33, down 14.6 cents.

Buyers looking for cheese are increasingly active in seeking to build supplies, says DMN. This includes continuing customers of manufacturing plants seeking to increase orders, as well as non-continuing customers now looking for loads where they can find them. Continuing customers have more success. Some cheese plants in the Upper Midwest are benefitting from strong milk supplies, up from recent weeks in volume as well as components, leading to plants operating with full schedules.

Looking to the West, domestic cheese buyers are increasingly motivated to build supplies for holiday sales and are moving beyond hand to mouth purchases. Orders to plants are increasing. Some blocks are also moving through spot market transactions at prices near market delivered in the West. Manufacturing schedules are generally steady to lower, depending on milk availability. Some plants could increase cheese output with more milk.

The Foreign Agricultural Service (FAS) reports August U.S. cheese and curd exports totaled 69.1 million pounds, an 11 percent increase from a year ago. Year through August exports totaled 578.8 million pounds, 29 percent higher than 2013.

Cash Grade A nonfat dry milk held all last week at $1.38. Two carloads traded hands on the week. NDPSR powder averaged $1.4953, up 0.2 cent, and dry whey averaged 66.65 cents, up 0.2 cent.

10/22/2014