USDA’s latest Livestock, Dairy & Poultry Outlook combines the past, present and future with some peaks, valleys and plains.

 

Recap: 2014 a record year

Average prices for major dairy products reached record highs in 2014:

• Cheddar cheese prices averaged $2.16/lb. for the year, and quarterly prices were above $2.00/lb. for the entire year.

• Butter prices averaged $2.14/lb. for the year, reaching a quarterly peak of $2.57/lb. in the third quarter.

• Nonfat dry milk (NDM) prices averaged $1.77/lb. for the year, with prices declining from a first-quarter high of $2.07/lb.

• Dry whey prices averaged 65¢/lb., with quarterly highs of 68¢/lb. in the second and third quarters.

High dairy product prices translated into high milk prices for dairy farmers. The average all-milk price for 2014 was a record high of $23.97/cwt., 19.6% higher than the 2013 average of $20.05/cwt.

Robust commercial exports during 2014 played a major role in elevating dairy prices. Commercial exports for 2014 are estimated at 6.0% of milk production on a milk-fat milk-equivalent basis, and 19.0% of milk production on a skim-solids milk-equivalent basis.

 

Recent developments in dairy markets

Milk production for the fourth quarter of 2014 is estimated at 50.9 billion lbs., a reduction from last month's projection of 51.2 billion lbs. Estimates for fourth quarter 2014 domestic commercial disappearance were lowered, but export projections for the fourth quarter of 2014 were raised, based upon expected strength in exports of nonfat dry milk to Mexico.

Based on recent data, the milk cow number estimate for the fourth quarter of 2014 is 9.280 million head, and quarterly output per cow has been lowered to 5,490 lbs.

Milk production for 2015 is forecast at 211.7 billion lbs., a reduction from the 212.2 billion lbs. forecast last month.

Ending stocks for 2014 are expected to have been to 11.3 billion lbs. on a milk-fat basis (0.2 billion lbs. more than projected last month) and 13.1 billion lbs. on a skim-solids basis (1.2 billion lbs. more than projected last month). From October to November 2014, total natural cheese stocks rose from 996 million lbs., to 1.016 billion lbs., a very rare increase for November. Manufacturers’ NDM stocks also rose substantially, from 196 million lbs. at the end of October to 217 million lbs. at the end of November.

Butter stocks fell from 139 million lbs. to 101 million lbs. In November, whole milk powder ending stocks, at about 22 million lbs., were slightly higher than in October, but were 2.5 times higher than in the previous year.

 

Forecasts for 2015

Looking ahead, producers who enrolled in the Margin Protection Program for Dairy (MPP-Dairy) might not have to worry about buyer’s remorse. Read MPP-Dairy: 55% buy extra protection, 119 billion lbs. estimated enrolled

With higher beginning stock levels expected for 2015 and recent price declines, price forecasts have been lowered for 2015. Wholesale cheese and butter price forecasts have been lowered for the first three quarters, resulting in annual projections of $1.590-$1.670/lb. and $1.600-$1.710/lb., respectively. NFDM price forecasts have been lowered for the entire year, resulting in an annual projection of $1.270-$1.330/lb. Dry whey price forecasts have been lowered slightly for the first half of the year, resulting in an annual projection of 55.0-58.0¢/lb.

The forecast for the annual Class III price has been lowered to $16.20-$17.00/cwt., and the Class IV price forecast has been lowered to $15.60-16.50/cwt. The projected all-milk price has been lowered to $17.75-$18.55/cwt., a reduction from $18.45-$19.25/cwt. forecast last month. The Class III and Class IV quarterly projections are compared with CME closing prices for Jan. 16 (see table).

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

 

 

 

 

 

 

 

    Q1

24.53

 

22.61

 

23.10

 

 

    Q2

24.23

 

22.75

 

23.04

 

 

    Q3

24.37

 

22.82

 

23.42

 

 

    Q4

22.73

 

21.19

 

18.75

 

 

Year

23.97

 

22.34

 

22.09

 

 

2015

 

 

 

 

 

 

 

    Q1

19.05**

14.82

15.80**

13.45

14.45**

 

 

    Q2

16.90**

14.29

16.05**

13.94

15.30**

 

 

    Q3

17.80**

15.80

16.90**

15.41

17.00**

 

 

    Q4*

18.80**

16.10

17.60**

16.01

17.35**

 

 

Year*

18.15**

15.26

16.60**

14.70

16.05**

 

 

1/ USDA prices and forecasts from Livestock, Dairy & Poultry Outlook report (www.ers.usda.gov), issued Jan. 16, 2015.    

 

2/ Simple average of Chicago Mercantile Exchange  futures prices at close of trading on Jan. 16, 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

 

 

With lower projected domestic dairy prices, U.S. exports, primarily of NFDM and whey products, are expected to become somewhat more attractive. Commercial export projections for 2015 have been raised by 100 million lbs. on a milk-fat basis and by 200 million pounds on a skim-solids basis.

USDA’s Foreign Agricultural Service estimates 2014 growth in milk production for the five largest dairy exporters combined (Argentina, Australia, EU, New Zealand and the United States) at about 4%. International dairy prices have fallen through the year, due to the increase in world milk production; Russia’s ban on imports from certain countries (particularly the EU); and a drop in whole-milk powder demand from China. In 2015, exports for the five largest dairy exporters combined are forecast to grow about 1% (Argentina, 3%; Australia, 1%; EU, 0%; New Zealand, 2%; and the United States, 3%).

Projections for 2015 assume that the Russian export ban will be lifted as scheduled in August and that China’s economic growth will slow from an estimated rate of 7.4 percent in 2014 to 6.5 percent in 2015. For more details, see http://apps.fas.usda.gov/psdonline/circulars/dairy.pdf.

 

Beef and feed

Beef prices may provide some incentive to cull low-end dairy cows. The Livestock, Dairy & Poultry Outlook estimates U.S. cutter cows will average in a range of $104-$116/cwt. in 2015, with the potential for highest prices in the middle of the year.

On the feed side of the equation, the 2014/15 marketing year price forecast for corn is $3.35-$3.95/bushel, raised from last month's forecast of $3.20-$3.80/bushel. The price forecast for soybean meal is unchanged at $340-$380/ton. With 2015 milk price forecasts lowered relative to feed prices, cow numbers and milk per cow are still expected to increase over 2014 levels, but at a lesser rate than forecast last month.

 

Price reports changing

USDA National Agricultural Statistics Service to discontinue preliminary milk price estimates

Beginning this month, USDA’s National Agricultural Statistics Service (NASS) will no longer publish preliminary all-milk prices. NASS has had concerns about reliability of the preliminary price estimates. The Agricultural Prices report to be published on Jan. 30, 2015, will show the December all-milk price as the most recent price estimate. For details, click here.