U.S. Milk Production Projections Lowered – Nov ’15
According to the November USDA World Agricultural Supply and Demand Estimate (WASDE) report, projected U.S. milk production was lowered for both 2015 and 2016 as the dairy herd is expected to decline more rapidly from its second quarter peak and growth in milk per cow in 2015 remains slower than expected. 2015 projected milk production of 208.7 billion pounds was reduced by 0.2 billion pounds, reaching a five month low. 2015 projected milk production equates to a 1.3% YOY increase from 2014 production levels, slightly less than the three year average growth rate of 1.6%. 2016 projected milk production of 212.9 billion pounds was reduced by 0.1 billion pounds, reaching a seven month low. 2016 projected production translates to a 2.0% increase from the 2015 projected production levels. Exports were reduced for 2015 on weaker butter, cheese and whey sales. Largely uncompetitive prices are likely to limit growth in export sales of butter and to a lesser extent, cheese in 2016. Imports were reduced on both a fat and skim-solids basis for both 2015 and 2016 as imports of milk protein concentrates and casein are expected to be lower. Strong domestic demand for butter is expected to support relatively high butter prices during the remainder of 2015 but the price forecast for 2016 was lowered as supplies are expected to be large. Large supplies are also expected to affect cheese prices, which were lowered for 2015 and 2016. NFDM prices were lowered for 2015 and 2016 as prices move closer to international levels while whey prices were unchanged from the previous month. The 2015 Class III price estimate was lowered by $0.15/cwt to $15.75-$15.85/cwt, reflecting the lower projected cheese prices. The 2015 Class IV price estimate was raised $0.25/cwt to $14.10-$14.30/cwt, as stronger forecasted butter prices more than offset lower NFDM prices. The 2016 Class III price forecast was reduced by $0.05/cwt to $14.70-$15.60/cwt, finishing 4.1% below the 2015 forecasted price at the midpoint. The 2016 Class IV price forecast was lowered by $0.10/cwt to $13.85-$14.85/cwt, but remains 1.1% above the 2015 forecasted levels. 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 $17.00-$17.10/cwt, up $0.10/cwt from the previous month but remaining 28.9% below the 2014 average All-Milk price of $23.98/cwt. The 2016 All-Milk price forecast of $15.95-$16.85/cwt was reduced by $0.10/cwt, declining below 2015 forecasted prices on both ends of the forecast for the second consecutive month.