U.S. Milk Production Projections Lowered – Dec ’15
According to the December USDA World Agricultural Supply and Demand Estimate (WASDE) report, projected U.S. milk production was lowered for both 2015 and 2016 as growth in milk per cow is expected to be reduced. 2015 projected milk production of 208.3 billion pounds was reduced by 0.4 billion pounds to the lowest projection on record. 2015 projected milk production equates to a 1.1% YOY increase from 2014 production levels and a 0.3% implied YOY increase in milk production over the final two months of the year. 2016 projected milk production of 212.4 billion pounds was reduced by 0.5 billion pounds, reaching an eight month low. 2016 projected production translates to a 2.0% increase from the 2015 projected production levels. Exports were reduced on a skim-solids basis for both 2015 and 2016 due to lower lactose and whey protein concentrate sales while exports on a fat basis were lowered for 2016 as global supplies of dairy products are expected to remain large. Fat basis imports were reduced for 2015 on slower butter imports while imports on a skim-solids basis were unchanged. Butter prices for the remainder of 2015 and early 2016 were raised as prices have remained stronger than expected into early December. Cheese prices were lowered slightly for 2015 and 2016 as domestic supplies are expected to be larger than anticipated. NFDM prices were reduced for 2015 and 2016 as domestic and international supplies are expected to pressure prices while whey prices were unchanged from the previous month. Class III price estimates were unchanged at the midpoint for 2015 and 2016 as the change in anticipated cheese prices was small. Class III price estimates finished at $15.75-$15.85/cwt and $14.75-$15.55/cwt for 2015 and 2016, respectively. The 2015 Class IV price estimate was raised $0.20/cwt to $14.30-$14.50/cwt, reflecting the stronger forecasted butter price which more than offset the lower NFDM prices, however the 2016 Class IV price was lowered an average of $0.20/cwt to $13.70-$14.60/cwt as the NFDM price forecast was reduced. 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 $17.05-$17.15/cwt, up $0.05/cwt from the previous month but remaining 28.7% below the 2014 average All-Milk price of $23.98/cwt. The 2016 All-Milk price forecast of $15.95-$16.75/cwt was reduced by $0.10/cwt on the high end of the forecast, remaining below 2015 forecasted prices on both ends of the forecast for the third consecutive month.