April production of dry whey was 12.8% lower than a year ago, while exports 14% higher. As a result, April 30 stocks of dry whey were relatively tight – 18.8% lower than a year ago. The result is higher dry whey prices, now trading at 66¢/lb., and giving strength to the Class III price. The Class III price had peaked in April at $24.31/cwt.; declined to $22.57/cwt. in May; and will be a little lower in June, near $21.35/cwt.
While dairy exports have been at record levels, they are likely to soften some the last half of this year. World milk production has improved, and world prices of dairy products have declined considerably since the beginning of the year, reducing the price competitiveness of U.S. dairy products on the world market. But, exports could still set a record for the year.
The growth in milk production is expected to increase for the last half of the year as milk cow numbers increase and milk per cow continues to improve. USDA’s latest dairy forecast has milk production for the year increasing 2.4%, with the number of milk cows averaging 0.4% higher for the year, and milk per cow increasing 2.1%. But, the increase in the number of milk cows and increases in milk per cow will need to strengthen for the remainder of the year in order to reach a 2.4% increase in total milk production for the year.
No sharp decline in milk prices like what has occurred at times in the past is anticipated. Butter and cheese sales are anticipated to remain favorable. Dairy stocks will build this summer and early fall, but not to levels that will put a lot of downward pressure on prices. Dairy exports could soften some for the last half of the year. The growth in milk production will pick up.
All of these factors indicate a slow decline in milk prices. The Class III price may not fall below $20/cwt, until October or November, ending the year around $18.75/cwt. Existing Class III futures are even higher than this. It now looks like the Class III price could average over $21/cwt. for the year, compared to $17.99/cwt. last year.
The Class IV price is also expected to decline as we move through the year, but could stay above $20/cwt. until November or December, and could average over $21/cwt. for the year, compared to $19.05/cwt. last year.
Looking ahead to first quarter of 2015, both the Class III price and Class IV price may average in the mid to high $17s to low $18s/cwt. But, so much can happen between now and then to change this forecast, including how this year’s crops turn out and resulting feed costs this fall and winter, as well as dairy export levels.