By LEE MIELKE
Mielke Market Weekly

USDA raised its 2015 milk production forecast for the first time in eight months in its latest World Agricultural Supply and Demand Estimates report issued last week. It also raised its 2016 forecast.

2015 production and marketings were reported at 208.7 billion pounds and 207.8 billion pounds respectively, up 100 million pounds and 200 million pounds respectively from last month’s report. If realized, 2015 production and marketings would be up 2.7 billion pounds or 1.3 percent from 2014.

2016 production and marketings were projected at a record high 213.9 billion pounds and 212.9 billion, both up 300 million pounds from last month’s estimate. If realized, 2016 production and marketings would be up 5.1 billion pounds or 2.5 percent from 2014. The increases are based on gains in output per cow.

The fat basis export forecast for 2015 was raised on higher cheese exports. Skim solids exports for both 2015 and 2016 were raised on larger exports of nonfat dry milk (NDM). Fat basis imports were raised for both 2015 and 2016 on expectations of strong demand for imported cheese.

Butter, NDM and whey prices for 2015 were forecast lower on relatively abundant supplies of those products. The cheese price forecast was raised, based on strong demand. NDM and whey prices were reduced for 2016. The 2016 butter price range was narrowed.

The Class III milk price forecast was raised for 2015 on stronger cheese prices but reduced for 2016 on lower whey prices. Look for the 2015 average to range $16.15-$16.55 per cwt, up from the $16.05-$16.55 projected last month, which compares to $22.34 in 2014 and $17.99 in 2013. The 2016 average should be around $16.15-$17.15, down a nickel from last month’s estimate.

Class IV prices for 2015 and 2016 were lowered on weaker product prices. The 2015 average is now projected at $14.20-$14.70, down from the $14.35-$14.95 expected a month ago, which compares to $22.09 in 2014 and $19.05 in 2013. The 2016 Class IV average, now projected at $15.40-$16.50, is down 20 cents from last month’s estimate.

While still trailing last year’s pace, U.S. dairy exporters continued to move relatively strong volumes of milk powder, cheese, whey products and lactose in the early months of 2015, according to the U.S. Dairy Export Council’s (USDEC) latest trade data report. That’s despite the huge differences between CME dairy product prices and global GDT levels, a growing global milk supply and a strong U.S. strong dollar.

USDEC’s Alan Levitt reports that April U.S. export volume and value were up for the third straight month. U.S. suppliers shipped 185,342 tons of milk powders, cheese, butterfat, whey and lactose in April, the second-highest figure ever (on a daily-average basis).

Lactose, whey protein isolate (WPI) and fluid milk exports reached record levels in April, while exports of nonfat dry milk/skim milk powder (NDM/SMP) were the third-most ever.

"These results suggest U.S. suppliers are maintaining most of their overseas business, despite the softest market conditions in six years," USDEC stated. "Exporters in both Europe and Oceania had more product to sell in April; EU-28 milk production was up an estimated 2 percent, and New Zealand milk production was up 8.5 percent. In addition, Australia and Argentina posted 3 percent gains. Increased supply has put U.S. exporters in a very competitive world marketplace.

For the U.S. market, solid export numbers for NDM/SMP were particularly critical in preventing powder stocks from continuing to accumulate. Almost 59 percent of U.S. NDM/SMP production for the month was sold overseas, resulting in a small reduction in April carryout inventories."

Cooperatives Working Together (CWT) accepted three requests for export assistance last week to sell 2.65 million pounds of butter to customers in the Middle East. The product will be delivered through November. CWT has assisted the sale of 35.1 million pounds of cheese in 2015, plus 29.24 million pounds of butter, and 20.1 million pounds of whole milk powder to 28 countries.

National Milk’s board voted to continue the farmer-funded program through 2018 at the current level of four cents per cwt. A news release stated that "CWT’s extension until Dec. 31, 2018, comes at a time of increasing U.S. milk production, declining world dairy prices and increased global competition due to the removal of European Union milk quotas."

"With the United States exporting the equivalent of one-seventh of its milk production, today’s vote will help ensure that this country remains a consistent and competitive supplier of dairy products to the world," said NMPF Board Chairman Randy Mooney, a dairy farmer from Rogersville, Mo.

Speaking of trade, the expectation of the last Global Dairy Trade auction was for a bit of a lift, according to HighGround Dairy’s Eric Meyer. Speaking on the June 5 DairyLine, Meyer said the GDT continued to price at 5 1/2-year lows, as low as 2009, as "there seems to be a continued bearishness." That hasn’t had a major impact on U.S. markets, but he warned that it would.

He admitted that April U.S. exports of nonfat dry milk and total cheese were above expectations despite the strengthening dollar and the high price differential, but he doesn’t see GDT prices strengthening any time soon.

Looking at the April Dairy Products report, Meyer said the numbers looked good on cheese; butter lagged some; and nonfat dry milk also saw some strength in the domestic markets.

The key number that may have given some support to the cheese side, according to Meyer, is that Cheddar cheese production was down 1.8 percent versus a year ago. "That could provide some support in the near term or perhaps it just gave us a little bit of a lift over the last 30 days," he concluded.