U.S dairy cow numbers up, but replacement heifer numbers lower

There are expectations of continued moderate U.S. dairy herd expansion this year into 2015. However, U.S. dairy farmers will have to do it with fewer available replacement heifers.

USDA released its semi-annual Cattle report on July 25, including survey-based estimates of U.S. dairy cows and replacement heifers.

U.S dairy cow numbers up, but replacement heifer numbers lowerAs of July 1, 2014, milk cows were estimated at 9.267 million head, up 67,000 head (1%) from July 1, 2012, and the highest July 1 total since 2008. (There was no survey in July 2013 due to budget sequestration.) The estimate is up about 58,400 head from Jan. 1, 2014.

Meanwhile, dairy replacement heifers (>500 lbs.) were estimated at 3.900 million head on July 1, 2014, down 200,000 head from two years earlier, and equal to July 1 totals in 2007 and 2008. Based on those estimates, there were 42.1 heifers >500 lbs. per 100 cows on July 1.

USDA's latest Livestock, Dairy &; Poultry Outlook report forecasts dairy cow numbers to average  9.260 million head this year, increasing to 9.345 million head in 2015.

Affecting the total number of replacements available to U.S. farmers, about 20,000 female dairy replacements were exported in the first five months of 2014, down slightly from the pace set over the same period in 2012 and 2013.

Cow culling for slaughter is down from last year. January-June 2014 slaughter is estimated at 1.391 million head, down 175,600 from the same period in 2013.


July outlook

In addition to more cows, USDA's July dairy outlook expects milk per cow next year. With strong year-over-year rises in output per cow and modest herd expansion boosts milk production from June's forecast to 212.4 billion lbs., up about 3.2% from 2014.

Fats-basis milk equivalent imports are forecast to be 3.5 billion lbs. in 2014 based on year-to-date movement and then to hold at 3.5 billion lbs. in 2015. Imports are forecast at 5.2 billion lbs. this year and 5.1 billion lbs. next year on a skims-solids basis. Skims-solids forecasts are lowered from June.

Current year fats-basis exports are lowered from June to 13.2 billion lbs. as high domestic butter prices curtail exports. Fats-basis exports for 2015 are unchanged from June at 13.0 billion lbs.. Skims-solids exports are raised in July to 40.4 billion lbs. based mostly on higher than expected year-to-date shipments of nonfat dry milk and skim milk powder (NDM/SMP). Next year, skims-solids basis exports are projected at 39.1 billion lbs., an increase from June's forecast, but a year-over-year decline, based on increased foreign competition; however, global demand for NDM/SMP will remain strong. Internationally, exports are responding to high global demand. In the European Union, milk deliveries are at an all-time high, but robust foreign demand appears to support prices. Despite strong foreign competition, U.S. exports have remained firm, especially NDM and SMP exports to Mexico.

Firm domestic commercial use of dairy products is expected in light of continued economic recovery. Domestic commercial use, on a fats basis, is forecast at 195.6 billion lbs., unchanged from June. However, next year domestic commercial use on a fats basis is expected to climb to 200.6 billion lbs., an increase from June's forecast as well as a 2.6 percent year-over-year rise. On a skims-solids basis, domestic commercial use is forecast to reach 169.3 billion lbs., a dropoff from June's forecast, and then to rise to 177.2 billion lbs. in 2015.


Price outlook

USDA's July dairy outlook boosted dairy product price projections from a month earlier. Cheese prices are projected higher this month based on current price strength. The prices are forecast to average $2.030-$2.060/lb. this year and fall to $1.670-$1.770/lb. in 2015, based on continued increases in milk production. Butter prices are revised upward from June, to $1.965-$2.025/lb., based on strength in demand and tight supply. That condition is expected to continue into 2015, as butter prices were revised upward this month to $1.650-$1.780/lb.; however, prices will decline on a year-over-year basis. July NDM price forecasts reflect the robust export outlook for those products and will likely average $1.835-$1.865/lb. in 2014 and decline to $1.605-$1.675/lb. in 2015. July whey prices are forecast up from June to 63.5-65.5¢/lb. for the current year and to fall to 55.0-58.0¢/lb. in 2015, unchanged from June.

The price outlook for the major dairy products points to declines in 2015 in class and all milk prices. The Class III price is forecast at $21.00- $21.30/cwt. this year, falling to $16.95-$17.95/cwt. in 2015. The Class IV prices continue to lead Class III prices both this year and next, averaging $21.95-$22.35/cwt. and sliding to $18.70-$19.80/cwt. in 2014 and 2015, respectively. The all milk price is forecast to average $23.25-$23.55/cwt. in 2014 and to fall to $19.75-$20.75/cwt. in 2015.