USDA outlook: Cow numbers, milk production expected to climb

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Expectations of continued moderate feed prices and higher milk prices reinforce the expectation of a U.S. dairy herd expansion this year, according to USDA’s monthly Livestock, Dairy & Poultry Outlook report, issued Jan. 16.

The January report projects 2014 cow numbers to average 9.250 million head, peaking at 9.275 million in the fourth quarter of the year. That would be up 70,000 head from the fourth quarter of 2013. The report noted prices for open dairy heifer prices rose slightly in December, which may signal increased demand for cows.

Milk yield per cow is forecast up about 391 lbs. from 2013, to 22,230 lbs. in 2014. That would result in total 2014 milk production of 205.6 billion lbs. and, if realized, would be up about 2.1% from 2013.

Like last week’s World Ag Supply & Demand Estimates report, the dairy outlook reduced fat-basis imports for 2014 to 3.7 billion lbs., based on expected declines in butterfat imports. Skims-solids basis imports remain forecast at 5.2 billion lbs.

Export projections were raised to 11.2 billion lbs. on a fats-basis, thanks to continued strong foreign demand for cheese and butterfat; and to 38.5 billion lbs. on a skims-solids basis, with continued robust demand for nonfat dry milk (NDM) and cheese offset by lower projected lactose shipments.

Ending stocks for 2014 were raised slightly, to 11.6 billion lbs. on a fats basis, but lowered to 12.0 billion lbs. on a skims-solids basis. The higher anticipated milk production is expected to contribute to higher cheese and butter inventories by year end. The slightly lowered skims-solids basis ending stocks are based on continued demand for NDM, which is expected to keep inventories a little tighter despite higher milk production.

Prices in 2014 for cheese, butter, and NDM were increased from the previous month’s forecast, due to continued strong foreign and domestic demand. The 2014 cheese price is forecast in a range of $1.760-$1.840 /lb., and the butter price increased to $1.515-$1.625/lb. The NDM price is forecast at $1.805-$1.865/lb. The whey price is expected to be 55.0¢-58.0¢/ this year, unchanged from the previous forecast.

International prices will remain firm in 2014, and U.S. suppliers will stay competitive despite higher expected output from Australia and New Zealand.

As a result of higher dairy product prices, 2014 milk prices were also forecast higher. The Class III milk price is raised to $17.80-$18.60/cwt.; and the Class IV price is moved up to $19.80-$20.70/cwt. The projected 2014 all milk price is increased to $20.60-$21.40/cwt.

For the most part, current Chicago Mercantile Exchange (CME) futures prices are slightly more bullish for Class III, but align fairly closely on Class IV (see table for 2014 quarterly USDA milk price projections and current CME closing prices for Class II/IV milk below).

Milk price averages & forecasts, $/cwt., Jan. 16, 2014


All milk

Class III


Class IV



USDA1

CME2

USDA1

CME2

USDA1

2009

12.83


11.36


10.89

2010

16.26


14.41


15.09

2011

20.14


18.37


19.04

2012

18.53


17.44


16.01

2013






  Q1

19.50


17.44


17.71

  Q2

19.57


18.04


18.62

  Q3

19.53


17.81


19.13

  Q4

21.37


18.67


20.74

Year

19.99


17.99


19.05







2014






  Q1

22.45-22.85

20.56

19.55-19.95

22.57

21.50-22.00

  Q2

20.80-21.50

18.79

17.85-18.55

20.95

20.40-21.20

  Q3

19.70-20.70

18.14

17.15-18.15

19.39

19.15-20.25

  Q4

19.40-20.40

17.85

16.65-17.65

18.77

18.20-19.30

Year*

20.60-21.40

18.83

17.80-18.60

20.42

19.80-20.70

 

 

 

 

 

 

1/ USDA prices and forecasts from Livestock, Dairy & Poultry report (www.ers.usda.gov), issued Jan. 16, 2014.

2/ Simple average of Chicago Mercantile Exchange futures prices at close of trading on Jan. 15, 2014.

* Average may include actual federal milk marketing order Class III and Class IV prices for affected months.

Two upcoming USDA reports will provide a clearer picture of cow numbers. USDA’s National Ag Statistics Service will release its monthly Milk Production report on Jan. 23. A survey-based Cattle report is due to be released on Jan. 31, and will include survey-based estimates of cow and replacement heifer numbers.


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