According to the July USDA World Agricultural Supply and Demand Estimate (WASDE) report, the 2018 U.S. milk production projection was reduced by 0.1 billion pounds from the previous month on slightly lower numbers and milk per cow yields, finishing at the lowest projected level on record. 2018 projected milk production equates to a 1.1% YOY increase from 2017 production levels, which would be a five year low. The 2019 U.S. milk production projection was reduced by 0.5 billion pounds from the previous month on continued slow growth in milk per cow yields and lower cow numbers, which are expected to be driven lower by weak producer margins. 2019 projected milk production equates to a 1.2% increase from 2018 projected levels, remaining below ten year average growth rates.

2018 export forecasts were unchanged from the previous month on a milk-fat basis but lowered slightly on a skim-solids basis due to recently implemented Chinese tariffs on select dairy products. 2018 import forecasts were raised slightly on a milk-fat basis on higher imports of butterfat products while remaining unchanged on a skim-solids basis. 2018 projected dairy export volumes translated to 16.6% of total U.S. milk solids production while import volumes were equivalent to 3.5% of total U.S. milk solids production.

For 2019, export forecasts were raised slightly on a milk-fat basis on expected competitive U.S. pricing but reduced on a skim-solids basis on concerns of lingering trade issues, with each finishing below 2018 levels. 2019 import forecasts remained unchanged on both a milk-fat and skim-solids basis. 2018 projected net dairy trade of 13.1% is on pace to reach a record high while 2019 projected net dairy trade is expected to remain at the second highest figure on record, down slightly from the 2018 projected record highs.

Butter, cheese, dry whey and nonfat dry milk price projections were all reduced for 2018, with price weakness expected to carry through into 2019 for cheese, dry whey and nonfat dry milk on high stocks and lower global prices. The 2019 butter price forecast was raised, however, as stocks are expected to be worked down.

The 2018 Class III price forecast of $14.30-$14.60/cwt was reduced by $0.80/cwt at the midpoint, finishing 10.6% below 2017 price levels, while the 2019 Class III price forecast of $14.70-$15.70/cwt was reduced by $0.60/cwt but remained 5.2% above 2018 projected price levels. The 2018 Class IV price forecast of $13.65-$14.05/cwt was reduced by $0.70/cwt at the midpoint, finishing 8.6% below 2017 price levels, while the 2019 Class IV price forecast of $13.65-$14.75/cwt was reduced $0.05/cwt from the previous month but remained 2.5% above 2018 projected price levels. The 2018 projected All-Milk price of $15.95-$16.25/cwt was reduced by $0.70/cwt at the midpoint, finishing 8.8% below 2017 price levels. The 2019 All-Milk price forecast of $16.25-$17.25/cwt was reduced $0.45/cwt from the previous month but remained 4.0% above 2018 projected price levels.