The Agriculture Department lowered its 2019 milk production estimate for the seventh month in a row in the latest World Agricultural Supply and Demand Estimates report, blaming slower-than-anticipated growth in milk per cow and lower expected cow numbers. The 2020 forecast was also reduced as higher anticipated feed costs are expected to weaken producer margins, limiting growth in the dairy cow herd and milk per cow next year.
Production and marketings in 2019 are now estimated at 218.2 and 217.2 billion pounds respectively, down 500 million pounds from last month’s estimate. If realized, 2019 production would be up just 600 million pounds or 0.3 percent from 2018.
The 2019 Class III milk price forecast was reduced on lower expected cheese and whey prices. It’s estimated to average $15.90 per hundredweight, down 15 cents from last month’s projection but would be $1.29 above the 2018 average and compares to $16.17 in 2017. The 2020 average is put at $16.65, up a dime from last month’s estimate and 75 cents above what is expected for 2019.
The Class IV price forecast was raised on higher forecast butter and nonfat dry milk prices. The 2019 average is expected at around $16.40, up 20 cents from last month’s projection and would be $2.17 above the 2018 average and compares with $15.16 in 2017. The 2020 Class IV average is now put at $16.85, up a nickel from a month ago and would be 45 cents above what’s expected for 2019.
FCStone’s Dave Kurzawski wrote in his June 11 Early Morning Update: “We’ve come to expect a wider spread this time of year as excess loads of milk, normally discounted milk, gets made into barrel cheese. To be sure, that same story has played out this year as well. But the story differs in that the U.S., and to some degree the world, is just not awash in milk as we’ve seen the past few years. We’ve seen a burst of barrel production over the past month or so courtesy of some otherwise concerning demand issues, weaker demand on mozzarella in particular, not burdensome excesses of fresh milk. Because of this, we see the barrel market as nearing the tail end of this fire sale.”
He adds that “spring milk production is tighter than expected this time of year not because of weather, but because of economics. This dynamic, we believe, could become exacerbated with summer heat and higher feed costs.”
Dairy Market News reports that cheese demand is moving in a positive direction, according to Midwestern cheese producers, particularly specialty cheese and curds. Some production schedules are at full-bore. Milk for cheese is available, “relatively,” and spot milk prices ranged from 50 cents over to $1 under Class.
Favorable autumn dairying conditions resulted in New Zealand-based Fonterra processing additional milk, according to FCStone, and as a consequence has increased its offerings of anhydrous milkfat, skim milk powder, and whole milk powder for the Global Dairy Trade on June 18. Fonterra also increased its forecast offer quantity of anhydrous milkfat for the next 12 months.
Farm milk yields are generally steady nationally, according to the USDA’s weekly update. Output is growing in the Eastern region and in the mountain states of Idaho, Utah and Colorado. Midwest farmers suggest cow-comfort levels have been fairly good for steady production. Undoubtedly, Class I sales have slipped across the country as school districts and colleges have begun to break for the summer. Some school lunch programs are continuing to maintain food service orders of fluid milk.
In politics, the National Milk Producers Federation, the U.S. Dairy Export Council, the International Dairy Foods Association, and more than 960 other groups representing the U.S. food and agriculture value chain called on Congress last week to quickly ratify the U.S.-Mexico-Canada Agreement. A joint letter sent to representatives of top-producing dairy states detailed how the provisions of the USMCA “positively impact the U.S. dairy industry.”