USDA’s latest Livestock, Dairy & Poultry Outlook suggests higher milk cow numbers in the year ahead, but lower milk production per cow than previously expected. Although milk prices have fallen, milk production expansion is expected to continue.

Milk cows for the fourth quarter of 2014 totaled 9.284 million head, 4,000 more than expected last month. USDA’s Cattle report indicates continued herd expansion, with milk cows totaling 9.307 million head as of Jan. 1, 2014, a 1% increase over the previous year. Dairy heifers totaled 4.615 million head, also a 1% increase, with 2.997 million expected to calve during the year.

Given higher-than-expected milk cow numbers as of Jan. 1, the forecast for 2015 cow numbers has been raised to 9.320 million head, an increase of 5,000 head from last month’s forecast. With lower milk per cow than expected for the fourth quarter of 2014, lower projected milk prices, and noticeable effects of drought in California, the milk per cow forecast for 2015 has been lowered to 22,690 lbs., 40 lbs. less than forecast last month. Milk production for 2015 is forecast at 211.5 billion lbs., a year-over-year increase of 2.7%, but 200 million lbs. less than forecast last month.

With the recent rise in CME butter prices and relatively low butter stock levels, butter price forecasts for 2015 have been raised to $1.655-$1.755/lb. With substantial recent declines in the nonfat dry milk (NFDM) prices and relatively high NFDM stock levels, NFDM price forecasts for 2015 have been lowered to $1.185-$1.245/lb. The annual cheese price has been narrowed from last month’s forecast, to $1.595-$1.665/lb. The dry whey price forecast for 2015 is raised to 56-59¢/lb., based on recent strength in domestic prices and exports of whey products.

The Class IV forecast for 2015 has been lowered to $15.10-$15.90/cwt., as lower NFDM prices are expected to more than offset higher butter prices. The Class III forecast has been raised to $16.30-$17.00/cwt. based on higher expected whey prices. The Class III and Class IV quarterly projections are compared with CME closing prices for Feb. 17 (see table).

The all-milk price for 2015 is forecast at $17.40-$18.10/cwt., a reduction from last month’s forecast of $17.75-$18.55/cwt.

 

Milk price averages & forecasts, $/cwt., Feb. 17, 2015

 

All milk

Class III

Class III

Class IV

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

20.05

 

17.99

 

19.05

2014

23.98

 

22.34

 

22.09

 

 

 

 

 

 

2015

 

 

 

 

 

    Q1

17.25**

16.02*

15.85**

14.33*

13.60**

    Q2

16.80**

16.09

16.05**

16.53

14.45**

    Q3

17.85**

17.42

17.00**

17.27

16.35**

    Q4*

19.00**

17.30

17.70**

17.29

17.60**

Year*

17.75**

16.71

16.65**

16.36

15.50**

1/ USDA prices and forecasts from Livestock, Dairy & Poultry Outlook report (www.ers.usda.gov), issued Feb. 17, 2015.    

2/ Simple average of Chicago Mercantile Exchange futures prices at close of trading on Feb. 17, 2015.   

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

** Represents mid-point of USDA price forecast range

 

The 2014 dairy situation

U.S. 2014 milk production totaled 206.0 billion lbs., a 2.4% increase over 2013 and the highest rate of growth since 2006. Two years of relatively high all-milk prices, averaging $20.05/cwt. in 2013, and $23.98/cwt. in 2014, combined with moderating feed prices, providing market signals for the robust gain in milk production.

Strength in dairy demand from both domestic and foreign markets contributed to relatively high milk prices. In 2014, domestic commercial disappearance grew by 2.3% year-over-year on a milk-fat milk-equivalent basis (the highest growth rate since 2005) and by 1.3% on a skim-solids milk-equivalent basis.

Commercial exports reached records of 12.5 billion lbs. on a milk-fat basis (6.1% of milk production) and 39.2 billion lbs. on a skim-solids basis (19.0% of milk production). The increase in commercial exports was uneven throughout 2014, with year-over-year gains in the first half, and reductions in the second half. As the year progressed, U.S. dairy product prices became less competitive with prices of foreign competitors.