WASDE Outlook Predicts Higher Milk Prices

The World Agricultural Supply and Demand Estimates release June 12 forecast milk production for 2018 down from last month on slightly lower cow numbers and slower expected growth in milk per cow.

No change was made to the annual cowherd for 2019, but the milk production forecast for 2019 is lowered from last month on continued slow growth in milk per cow. For 2018, fat basis exports were raised from the previous month as second-quarter exports are strong and continued strength in sales of a number of fat-containing products will largely mitigate the impacts of Mexico’s tariffs on U.S. cheese. For 2019, the fat basis export forecast is lowered. Skim-solids basis export forecasts for 2018 and 2019 are raised from the previous month on robust demand for non-fat dry milk and lactose thus far in 2018, and this strength is expected to carry into 2019. Fat basis imports for 2018 and 2019 are raised on higher imports of butterfat products, while skim-solids basis import forecasts for 2018 and 2019 are reduced on lower imports of milk proteins and a number of other dairy products. The 2018 cheese price is unchanged at the midpoint of the range, but is raised for 2019. The 2018 butter price forecast is raised, but is reduced slightly for 2019. Nonfat dry milk (NDM) and whey price forecasts are raised for both 2018 and 2019 on strong demand and a reduced production forecast. For 2018, the Class III price is raised on the stronger whey price. The Class IV price forecasts reflects higher butter and NDM prices. For 2019, both Class III and Class IV prices are raised. The all milk price is forecast higher at $16.60 to $17.00 per cwt for 2018 and is increased to $16.70 to $17.70 per cwt for 2019.

Beginning corn stocks are down largely reflecting a 75-million-bushel increase in projected exports for 2017/18 to 2.300 billion bushels, which if realized would be the highest since 2007/08. Exports during the month of April were record high, besting the prior monthly shipment record set in November 1989. Export inspection data for the month of May implies continued robust global demand for U.S. corn, while old crop outstanding sales at this point in the marketing year are record high. Projected 2018/19 corn used for ethanol is raised 50 million bushels, offsetting a 50-million-bushel reduction in food, seed, and industrial (FSI) use WASDE-578-2 of sorghum. Corn feed and residual use is lowered 25 million bushels with increased ethanol by-product production and higher expected prices. With supply falling and use rising, ending stocks are lowered 105 million bushels to 1.577 billion bushels, which if realized, would be the lowest level since 2013/14. The season-average farm price is raised 10 cents at the midpoint with a range of $3.40 to $4.40 per bushel.

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