Based on the most recent World Agricultural Supply and Demand Estimates (WASDE) report, the 2013/14 domestic use and exports of corn were raised this month, tightening stocks. However, the corn season-average price is forecast at $4.05-$4.75 a bushel, a price reduction based on lower year-to-date reported prices. Soybean production was unchanged in this month’s WASDE; however, soybean meal prices were raised to $400-$440 per ton.
The price boost is based on stronger demand from both the European Union (EU), and Southeast Asian countries, which more than offsets an expected decline in domestic use. According to the November Agricultural Prices report, the preliminary November alfalfa price this year slipped below the October price to $188 a ton and is well below last year’s November price. On balance, dairy producers will likely face even lower feed prices next year compared with 2013.
The current year’s projected dairy herd size is reduced slightly to 9.220 million cows based on a smaller expected fourth-quarter cow population. Production per cow is unchanged from last month at 21,865 pounds per cow.
2013 production was reduced fractionally to 201.6 billion pounds. It is likely that the 2013 herd reduction has reached its nadir. The projected 2014 U.S. dairy herd size is increased slightly from last month to 9.250 million cows. The 2014 forecast yield per cow is also increased this month to 22,190 pounds per cow. Production is raised from November to 205.3 billion pounds.
The slightly higher cow numbers and yields are based on an improved profit outlook for producers, a result of continued firm milk prices and declining feed costs.
Fats basis imports are lowered this month to 3.9 billion pounds for 2013. Current year skims-solids basis imports are increased to 5.3 billion pounds, based largely on higher imports of casein and whey protein concentrates. Fats basis imports for 2014 are unchanged from November at 4.0 billion pounds. Skims-solids basis imports 2014 are also unchanged from November projections at 5.2 billion pounds.
Current year fats-basis exports are raised this month to 12.1 billion pounds. The pace of butterfat exports has been robust, with strong sales to Ukraine, Morocco, and Korea; these sales to nontraditional markets may be due to tight supplies in the EU. Cheese exports are increased based on fresh cheese sales to Mexico, Korea, and even Australia.
Skims-solids basis exports are lowered for 2013 to 38.9 billion pounds. For 2014, fats-basis exports are raised to 10.8 billion pounds and skimssolids basis exports are increased to 38.4 billion pounds. Cheese exports are expected to be stronger next year, underpinning the fats basis export forecasts, while stronger skim milk (SMP)/nonfat dry milk (NDM) exports support the higher skims-solids export forecast.
Commercial ending stocks for 2013 are lowered from November on both a fats and skims-solids basis.
The fats basis stocks are predicated on lower expected supplies of cheese and butter. The lowered skims-solids basis stocks are a result of lower cheese stocks and a nearly 25-percent reported decline in October from September for NDM stocks.
Fats basis commercial ending stocks for 2014 were unchanged from November. Strong demand for cheese and butter could tighten stocks early in 2014. However, increased milk production in 2014 and prices that favor butter/powder production could boost butter stocks later in the year. Skims-solids basis ending stocks were tightened based on continued robust demand for milk powder.
Dairy product prices are generally higher both in 2013 and 2014. However, current-year cheese prices were lowered from last month to $1.760-$1.770 per pound, based on year-to-date reported prices.
Cheese prices for 2014 were raised this month from November to $1.690-$1.770 per pound. Butter prices are raised for both 2013 and 2014 from November to $1.530-$1.560 per pound and $1.500- $1.610 per pound, respectively. Similarly, NDM prices are raised to $1.695-$1.715 per pound in 2013 and $1.715-$1.775 per pound next year.
Whey prices are boosted to 58.5-59.5 cents per pound in 2013 and to 55.0-58.0 cents per pound in 2014, although this represents a year-over-year decline in whey prices. Strong demand both internationally and domestically for dry products supports the higher December forecast prices.
The Class III price forecast for 2013 is unchanged from November at $17.90-$18.00 per cwt, but is raised for 2014 to $17.05-$17.85 per cwt based on higher cheese and whey prices. The Class IV price for 2013 is raised from last month to $18.95- $19.15 per cwt and is raised for 2014 from last month to $19.00-$19.90 per cwt. The better Class IV price outlook is due to higher forecast NDM and butter prices next year. The all milk price is increased from November to $19.90-$20.00 per cwt for this year and raised for 2014 to $19.70-$20.50 per cwt.