WASDE: Projections, futures prices in alignment, for now

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Milk futures prices tumbled in a week that saw a bullish USDA dairy forecast, but if the market decline stops, the USDA projections and Chicago Mercantile Exchange Class III/IV prices will be somewhat in alignment.

USDA’s World Ag Supply & Demand Estimates (WASDE) report raised the 2014 milk production forecast, but also raised projected dairy product and milk prices. Strong producer returns are expected to encourage a more rapid expansion in cow numbers and increased milk per cow, according to USDA’s report, released April 9.

• 2014 production and marketings were projected at 206.1 billion lbs. and 205.2 billion lbs., up 400 million lbs. and 500 million lbs., respectively. If realized, 2014 production and marketings would be up about 2.4% from 2013.

Projected fat-basis exports were raised on higher sales of cheese and butter, but the skim-solids export forecast was lowered on weaker-than-expected nonfat dry milk (NDM) sales. Projected skim-solid imports were reduced slightly due to lower imports of milk protein concentrate and casein.

Product price forecasts (see table) for cheese, butter and whey are higher, supported by strong demand and

price strength through the first quarter of 2014. However, the NDM price is unchanged at the midpoint, as export demand is weaker than expected.

Projected 2014 Class III and Class IV prices were raised on higher product prices. The all-milk price is forecast at $22.55-23.05/cwt.

In comparison to the USDA projections, 2014 CME Class III futures prices will average $20.67/cwt., based on the close of trading on April 10. Class IV futures will average $21.13/cwt. in 2014. Both are within the range of USDA projections.

 

Beef prices

Affecting cull cow prices, U.S. beef production is forecast higher, as lower forecast slaughter in the first quarter is more than offset by higher slaughter in the second half. The larger forecast second-half slaughter reflects larger placements of cattle during the first half. The beef import forecast for 2014 is raised from last month as demand for processing-grade beef remains strong, and the export forecast is raised on continued strong sales to Asian markets.

Despite increased production, cattle prices for 2014 are raised from last month. The 2014 forecast steer price is in a range of $144-$151/cwt., up about $5 on each end of the range from last month’s forecast. Prices are expected to be the strongest in the first half of the year. The 2013 steer price was estimated in at $125.89/cwt.

 

Dairy price forecasts 

 

 

 

 

 

Estimated

Estimated

Forecast

 

 

Product   

2012

2013

2014

 

 

Class III ($/cwt)

17.44

17.99

20.40-20.90

 

 

Class IV ($/cwt)

16.01

19.05

21.05-21.65

 

 

All milk ($/cwt)

18.53

20.01

22.55-23.05

 

 

Cheese ($/lb.)

1.7076

1.7683

1.985-2.035

 

 

Butter ($/lb.)

1.5943

1.5451

1.76-1.84

 

 

NFDM ($/lb.)

1.3279

1.7066

1.83-1.87

 

 

Dry whey (¢/lb.)

59.35

59.02

61.5-64.5

 

 

 

 

 

 

 

 

 Feed price* outlook

 

 

 

 

 

Estimated

Estimated

Forecast

 

 

Product

2011/12

2012/13

2013/14    

 

 

Corn ($/bu.)

6.22

6.89

4.40-4.80

 

 

Soybeans ($/bu.)

12.5

14.4

12.50-13.50

 

 

Soy meal ($/ton)

394

468

460-490

 

 

*U.S. average price paid at the farm level

 

 

Source: USDA World Ag Supply & Demand

 

 

Estimates report, April 9, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CME

2014

2014

2015

2015

 

Class III

Month

Quarter

Month

Quarter

 

Jan

21.15

 

18.24

 

 

Feb

23.35

 

18.13

 

 

Mar

23.33

22.61

18.00

18.12

 

Apr

23.96

 

17.75

 

 

May

21.22

 

17.56

 

 

June

19.91

21.70

17.59

17.63

 

July

19.60

 

17.64

 

 

Aug

19.55

 

17.41

 

 

Sept

19.54

19.56

17.42

17.49

 

Oct.

19.17

 

17.50

 

 

Nov

18.80

 

17.50

 

 

Dec

18.43

18.80

17.50

17.50

 

Annual

20.67

 

17.69

 

 

Closing futures prices on Chicago Mercantile Exchange as of April 10, 2014

 

Feed prices

On the feed side of the dairy equation, USDA’s World Ag Supply & Demand Estimates report said a 125-million-bushel increase in projected corn exports will reduce corn ending stocks by the same amount. Continued strong export sales and a rising weekly shipment pace for U.S. corn during March support the higher expected export level, as does an increase in projected global corn demand.

The 2013/14 season-average farm price for corn is raised 10¢ at the midpoint (see table), with the projected range narrowed to $4.40-$4.80/bushel, compared with $4.25-$4.75/bushel last month.

U.S. soybean supplies for 2013/14 are projected at 3.49 billion bushels, up 30 million, due to increased imports. Soybean exports for 2013/14 are increased 50 million bushels to 1.58 billion reflecting record year-to-date shipments and large outstanding sales. Despite relatively high prices and record harvests in South America, U.S. exports have remained strong, especially to China, where imports from the United States have already exceeded the previous marketing-year record.

Soybean crush is reduced 5 million bushels to 1.685 billion with lower domestic soybean meal consumption more than offsetting a small increase in projected soybean meal exports. Seed use is raised in line with the record plantings reported in the March 31 Prospective Plantings report, while residual use is reduced based on indications from the March 31 Grain Stocks report. U.S. soybean ending stocks are projected at 135 million bushels, down 10 million from last month.

Projected prices for soybeans and soybean products were all raised this month. The projected range for the season-average soybean price is raised 5¢ at the midpoint, to $12.50-$13.50/bushel. Soybean meal prices were projected at $460-$490/ton, up $5 at the midpoint.


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