High stocks dampen milk and product prices

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Corn prices for the 2012/13 year are unchanged in July at $6.75-$7.15 per bushel. For the 2013/14 year, corn prices were also unchanged from last month at $4.40- $5.20 per bushel. The production forecast for the 2013 corn crop was lowered based on lower expected harvested acreage. However, slightly higher imports and reduced feed and residual use maintained prices. The soybean meal price forecast remains at $290-$330 per ton where it was in June. According to the most recent Agricultural Prices report, preliminary June alfalfa prices were $220 per ton, fractionally lower than May but 10 percent above the June 2012 price.

The 2013 milk production forecast was raised slightly in July. Second-quarter estimated production was higher than forecast last month, and milk production is expected to remain slightly higher for the remainder of the year. Production is forecast at 202.0 billion pounds for 2013 and at 204.5 billion pounds in 2014, unchanged from June’s forecast. Producers will see lower feed prices into 2014, but milk prices are forecast slightly lower as well. The net effect should be a modest expansion in milk production by late next year.

Current year fat basis imports were unchanged in July at 4.1 billion pounds and are expected to hold at 4.1 billion pounds in 2014. This year’s skim-solids basis imports were lowered to 5.5 billion pounds as the pace of milk protein concentrate imports lags last year. Imports are forecast at 5.4 billion pounds for 2014, unchanged from June’s forecast. Current-year fat basis exports were raised this month to 10.1 billion pounds. Monthly cheese exports led 2012 exports through April and were just slightly behind May 2012. Butterfat exports rebounded in May after a steep fall off in April, contributing to a more optimistic 2013 export total. Fat basis exports are forecast at 10.3 billion pounds for 2014, unchanged from last month. Growth in global demand for dairy products and less foreign competition are the bases for the forecast.

Current-year skim-solids exports were raised in July to 36.6 billion pounds but were unchanged in 2014 from the June forecast at 36.4 billion pounds. Nonfat dry milk (NDM) exports shot up in April and May leading to the higher 2013 export forecast. Whey product exports year-to-date have been leading the corresponding 2012 monthly totals and advanced sharply in May, further bolstering the forecast.

Fat-basis ending stocks were raised from June forecasts and remain high by historic standards. The most recent Cold Storage report placed cheese stocks above last year’s stocks. Butter stocks especially seem to be accumulating. Fat-basis ending stocks were raised to 13.7 billion pounds. A continued increase in both domestic and foreign demand for dairy products is expected to draw down 2014 ending stocks to 12.8 billion pounds. Skim-solids stocks are forecast at 13.0 billion pounds for the current year, slipping to 12.8 billion pounds by the end of 2014. In May, NDM stocks were above both a month earlier and a year earlier.

Cheese prices were lowered fractionally in July to $1.735-$1.765 per pound for the current year. Cheese prices are expected to decline to $1.630-$1.730 per pound in 2014. Butter prices are forecast at $1.515-$1.575 per pound in 2013 and at $1.450- $1.580 per pound in 2014; both downward revisions from June forecasts. Higher stocks of these products--especially this year and carrying into next year-- will likely pressure prices. Despite higher stocks, price prospects for NDM reflect continued strong export demand for dry milk products and reduced supplies from the European Union. The NDM price is projected at $1.615-$1.645 per pound, an increase from last month for the current year, and at $1.585-$1.655 per pound next year, unchanged from June. Whey prices are unchanged from the June forecast at 58.5-60.5 cents per pound this year and 56.5-59.5 cents per pound for 2014.

Class III milk prices were lowered slightly in July to $ 17.65-$17.95 per cwt reflecting the lower forecast cheese price. Next year, the Class III price is projected to slip to $16.60-$17.60 per cwt on weaker expected cheese prices. The Class IV price forecast was unchanged this month, but the price range was narrowed to $18.20-$18.60 per cwt. Next year’s Class IV price also lowered from the June forecast to $17.65-$18.75 per cwt based on lower forecast butter prices. The prospect of higher forecast milk production in 2014 compared with 2013 will also pressure prices downward. The 2013 all milk price was lowered this month to $19.50-$19.80 per cwt and to $18.70-$19.70 per cwt for 2014.



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