Exports buoy prices as herd liquidation appears slowed

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According to the USDA's Livestock, Dairy and Poultry report, the corn supply and use table is unchanged in June from last month. Projected corn prices also remain unchanged from May at $4.20 to $5.00 per bushel for 2012/13.

This forecast price is sharply lower than the projected $5.95 to $6.25 per bushel price expected for 2011/12. Similarly, soybean meal prices are forecast lower in 2012/13 at $335 to $365 per ton, offering some potential relief for dairy producers after the 2011/12 projected $360 per ton price.

Preliminary alfalfa hay prices were posted at $215 per ton according to the May Agricultural Prices report. This price is above April’s reported price and well above the May 2011 reported price. While there are still lingering effects of last year’s drought, pasture conditions have improved in parts of the United States, which could lead to lower forage prices for the upcoming season. The improved feed outlook could lead to a higher milk-feed price ratio later in 2012 and into 2013.

For June, the number of milk cows was raised to 9,235 thousand head for the current year and remains unchanged at 9,170 thousand head for 2013. While some dairy herd liquidation is expected, the improved feed outlook may improve producer margins enough to moderate the expected decline in dairy herd size this year. Continued good weather will likely boost milk output to 21,890 pounds per cow, a slight increase from May projections.

Milk per cow is forecast at 22,100 in 2013, unchanged from May. The result is a projected 202.2 billion pounds of milk production in 2012, an uptick from last month’s projection, and to 202.6 billion pounds of milk forecast in 2013, unchanged from May.

Fat-basis milk equivalent imports remain unchanged for June at 3.3 billion pounds for both 2012 and 2013. On a skim-solids basis, milk equivalent imports were lowered this month to 5.0 billion pounds for this year and to 4.9 billion pounds in 2013. Robust first-quarter imports of casein and milk protein concentrates (MPC) are expected to diminish over the year in a pattern similar to that of last year. For next year, while imports of MPC’s and casein will remain significant, they are expected to decline slightly.

Exports on both a fat- and skim-solid basis were increased for both 2012 and 2013. Fat-basis exports were raised to 8.9 billion pounds for this year and to 9.1 billion pounds for 2013. First-quarter cheese exports, especially to Mexico, have exceeded earlier forecasts and are likely to remain resilient for the remainder of 2012. A continued optimistic outlook for cheese exports is the basis for increasing 2013 fatbasis exports. The fundamentals for skim-solids exports are similar.

First-quarter skim-solid 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 June to 32.1 billion pounds for this year and to 32.8 billion pounds in 2013.

Rising milk production, and pressure from weaker international prices will act to moderate several of the product prices. Current-year NDM and whey prices were lowered this month, mostly on weaker demand, especially for whey. NDM prices for 2012 were lowered from May to $1.210 to $1.250 per poun, but the 2013 price was unchanged from May at $1.320 to $1.390 per pound. Whey prices were lowered to 54.0 to 56.0 cents per pound for the current year and were unchanged for 2013 at 55.5 to 58.5 cents per pound. The 2012 butter price range was narrowed this month from May’s estimate to $1.430 to $1.500, as higher current quarter prices are expected to be offset by lower prices toward the end of the year. The 2013 price forecast was unchanged from May at $1.465 to $1.595 per pound.

Cheese prices are forecast at $1.565 to $1.605 per pound this year. The lower end of the range was raised as exports continued strong. The cheese price is forecast at $1.600 to $1.700 per pound in 2013, unchanged from last month. The Class III milk price was lowered to $15.75 to $16.15 per cwt and is forecast unchanged at $16.20 to $17.20 per cwt in 2013. The Class IV price was trimmed to $14.35 to $14.85 per cwt for 2012 and is unchanged for next year at $15.40 to $16.50 per cwt. The change in the Class prices mainly reflects the softness in the dry product prices.

The all milk price was lowered to $16.85 to $ $17.25 per cwt this year and is unchanged at $17.25 to $18.25 per cwt for next year. Any improvement in producer margins will come mostly from lower feed prices later, with additional support from higher milk prices later in 2013.



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