USDA: Dairy Outlook

December Dairy Outlook Changed Little from November, Milk Prices Are
Forecast Up Slightly

The 2012/13 forecast corn supply and use was unchanged this month from November based on the most recent World Agricultural Supply and Demand Estimates (WASDE) report the corn season-average price is forecast at $6.80-$8.00 a bushel, a price reduction based on lower year-to-date reported prices. The relatively early corn harvest this year increased marketings and pressured prices downward.  Similarly, soybean production was unchanged in this month’s WASDE. However, crush was raised and soybean meal domestic disappearance was lowered slightly, in line with expected livestock product production forecasts. Consequently, soybean meal prices were lowered this month to $440-$470 per ton. Corn and soybean meal prices will still be higher in 2013 than in 2012 despite the small downward price revisions. According to the November Agricultural Prices report, the preliminary November alfalfa price this year remains above the 2011 price.  Although feed prices will likely be lower later in 2013 than those in 2012, dairy producers will face relatively high feed prices in 2013 compared with other recent years.

The projected 2012 U.S. dairy herd size is unchanged from last month at 9,225 thousand cows. Cow numbers were raised, boosting the 2013 average herd size in December’s forecast to 9,130 thousand cows. Current-year yield per cow was unchanged this month at 21,640 pounds. Milk per cow is forecast at 21,880 pounds next year, also unchanged from November. Milk production is projected at 199.7 billion pounds in 2012, unchanged from last month’s projection. Milk production for 2013 remains forecast at 199.7 billion pounds, unchanged from the
November forecast.

Fats basis imports are forecast at 3.9 billion pounds for 2012, based largely on higher butterfat imports.  Skims-solids basis imports are projected at 5.8 billion pounds, unchanged from last month.  Current-year fats basis exports were reduced in December to 8.9 billion pounds. The pace of butterfat exports has slowed as U.S. prices are less competitive with world prices.  Skims-solids exports are projected at 33.8 billion pounds for 2012.  For 2013, milk equivalent imports on both a fats and skims-solids basis were unchanged this month from November at 3.8 and 5.4 billion pounds, respectively.  Commercial exports on a fats basis were raised to 8.9 billion pounds and to 33.2 billion pounds on a skims-solids basis.  The increases are based on improved global demand for both cheese and whey products. 

Commercial ending stocks for 2012 on a fats basis were lowered in December based on lower expected butter stocks. Current year stocks on a skims-solids basis were raised based on higher than expected October stocks of nonfat dry milk (NDM).  Fats basis commercial ending stocks for 2013 were lowered slightly in December, reflecting lower butter beginning stocks. Commercial ending stocks in 2013 on a skims-solids basis were lowered from November.

Cheese and butter price forecasts for 2012 were reduced from November estimates, but NDM and whey were raised.  The 2012 cheese price was lowered this month to $1.700-$1.710 per pound but was raised to $1.750-$1.830 per pound for 2013.  The 13

stronger 2013 prices are based on improved cheese demand in both domestic and foreign markets.  Butter price forecasts were lowered to $1.585-$1.615 per pound and to $1.595-$1.705 per pound for 2012 and 2013, respectively. Butter demand has been weak and stocks ample.  Butter prices will likely improve in 2013 compared with current year prices.  NDM prices are forecast at $1.320-$1.340 per pound in 2012 and $1.440-$1.500 per pound in 2013, both upward revisions from November. Whey prices are projected at 59.0-60.0 cents per pound this year, a boost from November, and raised to 60.0-63.0 per pound from last month for 2013. Strong demand both internationally and domestically for dry products is expected to support the higher prices.

The Class III price forecast was lowered this month from November to $17.40-$17.50 per cwt and raised for 2013 to $18.00-$18.80 per cwt based on higher whey prices. The Class IV price for 2012 was unchanged from last month at $15.95-$16.15 per cwt as lower butter prices were largely offset by higher NDM prices. The Class IV price was raised in 2013 from last month to $17.00-$17.90 per cwt.  The slightly better Class IV price outlook is due to higher forecast NDM prices next year.  The all milk price is unchanged from November at $18.50-$18.60 per cwt. For 2013, the all milk price is unchanged but the range is narrowed 5 cents on each end to $19.15-$19.95 per cwt.

Source: USDA