Feed price increases will push herd liquidation

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According to the USDA's Livestock, Dairy and Poultry report, U.S. corn supplies were forecast sharply lower for 2012/13 as yields were lowered 20 bushels per acre. Soybean production was also reduced in the July WASDE report. Projected corn prices were raised from the June report to $5.40 to $6.40 per bushel, and soybean meal prices were boosted to $365 to $395 per ton since supplies are expected to be tighter for the balance of 2012/13.

Preliminary June alfalfa hay prices were posted at $201 per ton according to the June Agricultural Prices report. This price is below May’s reported price but still well above the June 2011 reported price. Consequently, the field crop outlook is expected to lead to higher feed prices for the balance of 2012 and into 2013.

Cow numbers began to show a decline with the May Milk Production report. The prospect of rising feed prices will likely accelerate this trend for the balance of 2012 and into 2013. Cow numbers were lowered to 9,230 thousand head in 2012 and to 9,145 thousand head for 2013 in July’s forecast.

Recent high temperatures will likely restrain milk production over the course of the summer and, coupled with higher feed costs, milk output per cow is lowered to 21,830 pounds from June projections. Milk per cow is forecast at 22,060 in 2013, a decline from June as higher feed prices take a toll. The result is a projected 201.6 billion pounds of milk production in 2012, a decline from last month’s projection, and to 201.7 billion pounds of milk forecast in 2013, also a drop from June.

Fat-basis milk equivalent imports were raised this month to 3.5 billion pounds for 2012 and to 3.4 billion pounds in 2013, mostly on the basis of stronger cheese imports, which will likely continue into 2013.

On a skim-solids basis, milk equivalent imports were lowered this month to 4.9 billion pounds for this year and to 4.7 billion pounds in 2013. Imports of casein and milk protein concentrates (MPC) are lowered for the year and into 2013 and will partially counter the higher expected cheese imports.

Exports on both a fat- and skim-solids basis were increased for both 2012 and 2013. Fat-basis exports were raised to 9.3 billion pounds for this year and to 9.2 billion pounds for 2013. Both cheese and nonfat dry milk (NDM) exports were strong in April and are expected to remain resilient for the remainder of 2012.

A continued optimistic outlook for cheese exports is the basis for increasing 2013 fat-basis exports. The fundamentals for skim-solids exports are similar. First-quarter skimsolids exports exceeded expectations, largely as a result of strong nonfat dry milk (NDM) exports. The higher export pace is expected to continue for the balance of 2012 and into 2013. Skim-solids exports were raised in July to 32.4 billion pounds for this year and to 32.9 billion pounds in 2013.

Current-year price forecasts for cheese and butter were raised this month. The prospect of lowered production and continued strong exports are expected to support the higher prices. Current-year cheese prices were forecast higher at $1.590 to $1.620 per pound and butter prices were raised slightly to $1.470 to $1.530 per pound. For 2013, cheese prices were raised slightly to $1.605 to $1.705 per pound and butter prices were unchanged from June’s forecast at $1.465 to $1.595 per pound. Prices for NDM were lowered slightly for this year to $1.210 to $1.240 per pound by lowering the upper end of the price range.

Relatively weak forecast income growth is expected to soften demand, tempering the price effect of reduced milk production. Next year’s NDM prices were unchanged from June at $1.320 to $1.390. Whey prices were unchanged at 54.0 to 56.0 cents per pound for 2012 and 55.5 to 58.5 cents per pound next year.

The higher cheese price leads to a higher forecast Class III price of $16.00 to $16.30 per cwt in 2012 and to $16.25 to $17.25 per cwt in 2013. The Class IV price was boosted to $14.55 to $14.95 per cwt for 2012 and is unchanged for next year at $15.40 to $16.50 per cwt. The increased Class IV price this year is based mostly on the spillover effect of higher butter prices tempered by slightly weaker NDM prices.

The all milk price was raised to $17.05 to $17.35 per cwt this year and to $17.35 to $18.35 per cwt for next year.



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July, 17, 2012 at 02:24 PM

.When is the USDA going to help the Dairy Farmers?? With low milk prices and terrible feed prices,nobody is going to be in the dairy business anymore . Also they should regulate DFA, who steal the dairy mens money with deducting a $1.20 off their milk cheque for intermarketed hauling ,instead like they tell them that they pay class 111. With high feed prices and the coop screwing the dairy farmers ,their isn't going to be a dairy left here in America..


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