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.
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.