U.S. Milk Production Projections Unchanged – Oct ’15
According to the October USDA World Agricultural Supply and Demand Estimate (WASDE) report, projected U.S. milk production was unchanged for both 2015 and 2016. 2015 projected production of 208.9 billion pounds equates to a 1.4% YOY increase from 2014 production levels, slightly less than the three year average growth rate of 1.6%. 2016 projected U.S. milk production of 213.0 billion lbs translates to a 2.0% increase from the 2015 projected production levels. Fat-basis imports were increased as domestic demand continues to support higher imports of cheese and butter. Fat-basis exports were reduced for 2015 on weaker cheese sales but changed for 2016. Skim-solids imports were reduced for both 2015 and 2016 while exports were reduced for 2015 but unchanged for 2016. Excessive global supplies of dairy products, coupled with a strong U.S. dollar and generally weak global demand are expected to continue to pressure exports during 2015 and 2016. Butter prices were unchanged for 2015 at the midpoint but raised for 2016 as domestic demand is expected to support relatively high butter prices. Cheese prices were raised for both 2015 and 2016 on continued strong domestic demand. NFDM prices were forecasted higher for both 2015 and 2016, reflecting a rebound in both domestic and international prices, while whey prices continue to be forecasted lower for both 2015 and 2016 as supplies remain large. The 2015 Class III price estimate was raised $0.10/cwt on the low end of the forecast to $15.90-$16.00/cwt, as higher cheese prices are anticipated to temporarily more than offset lower whey prices. The 2015 Class IV price estimate was raised $0.30/cwt on the low end of the forecast and $0.20/cwt on the high end of the forecast to $13.85-$14.05/cwt, due to higher butter and NFDM prices. The 2016 Class III price forecast was reduced by $0.25-$0.35/cwt to $14.75-$15.65/cwt, 4.7% below the 2015 forecasted price at the midpoint. The 2016 Class IV price forecast was raised by $0.35/cwt on the low end of the forecast and $0.25/cwt on the high end of the forecast to $13.95-$14.95/cwt, 3.6% above the 2015 forecasted level. As shown in the chart below, the 2015 All-Milk price is expected to be well below previous year price levels, at a range of $16.90-$17.00/cwt, up $0.10/cwt from the previous month on the low end of the forecast but remaining 29.3% below the 2014 average All-Milk price of $23.98/cwt. The 2016 All-Milk price forecast of $16.05-$16.95/cwt was reduced by $0.05-$0.15/cwt, declining below 2015 forecasted prices on both ends of the forecast for the first time.