U.S. dairy farmers received a multiple dose of information to update milk income and feed cost forecasts. The USDA released its Crop Production report, which included the first survey-based projections for 2017 crop acreage and yields; along with its monthly World Ag Supply & Demand Estimates report, including 2017-2018 feed and dairy price estimates.
USDA’s August WASDE report made deeper cuts to 2017-2018 U.S. milk production forecasts, but that had virtually no impact on milk price projections. As in recent months, the reduced milk production forecasts were tied to slower growth in milk per cow, more than offsetting increases in dairy cow numbers.
Anticipated milk production in 2017 was cut another 600 million pounds from last month’s forecast, to 215.7 billion pounds. USDA has now reduced its 2017 milk production estimate by 1.8 billion pounds since March. If realized, 2017 production would be up about 1.6 percent from 2016’s total of 212.4 billion pounds.
Looking ahead to 2018, the USDA forecast production at 220.3 billion pounds, down 900 million pounds from last month’s estimate, and down 1.7 billion pounds since May. If realized, 2018 production would be up about 2.1 percent from 2017’s estimate.
Estimated fat-basis exports were raised from the previous month for both 2017 and 2018; 2017 skim solids-basis export estimates were lowered based on weaker than expected whey sales, with stronger nonfat dry milk sales forecast in 2018.
Projected butter and cheese prices were raised for 2017 and 2018, but those gains were offset by weaker whey and nonfat dry milk prices. As a result, the Class III midpoint price forecasts were $16 per hundredweight (cwt) in 2017 and $16.80 per cwt in 2018. Class IV midpoint price forecasts for 2017 and 2018 were $15.90 and $16.25 per cwt, respectively. The projected all-milk midpoint price is $17.90 per cwt for 2017 and $18.50 per cwt for 2018.
More beef pressures prices
Impacting cull cow prices, the USDA raised the forecast for 2017 beef production, citing relatively large cattle placements in the second quarter which will likely impact fourth-quarter cattle slaughter. The beef production forecast was also raised for 2018, with large feedlot placement numbers to continue into late 2017 and early 2018.
Pressured by the larger-expected beef supplies, projected fed cattle prices were reduced in 2017 and 2018. The USDA said beef prices have already peaked for the year, forecasting fourth-quarter prices to drop nearly $20 per cwt from the second-quarter average of $133 per cwt, before a slight improvement in the first quarter of 2018.
Feed outlook
The Crop Production report indicated the corn and soybean harvests will be larger than many private trade analysts had predicted.
USDA forecast the 2017 corn harvest at 14.2 billion bushels, down 7 percent from last year. Area harvested for grain is forecast at 83.5 million acres, unchanged from the June forecast but down 4 percent from 2016. Based on conditions as of Aug. 1, yields are expected to average 169.5 bushels per acre, down 5.1 bushels from 2016. If realized, this will be the third-highest U.S. average yield and total production on record for the U.S.
The Aug. 1 corn objective yield data indicate the fifth highest number of ears on record for the combined 10 surveyed states (Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Nebraska, Ohio, South Dakota and Wisconsin). Record-high yields are forecast for Alabama, Louisiana, Michigan, Mississippi, New York, Pennsylvania and South Carolina.
This month’s WASDE 2017-2018 U.S. corn outlook is for lower supplies, reduced feed and residual use and exports, and a decline in ending stocks.
The projected 2017-2018 season-average corn price received by producers was unchanged from last month, at $2.90 to $3.70 per bushel, with a midpoint at $3.30 per bushel. The 2016-2017 average was about $3.35 per bushel.
Soybean production is forecast at 4.38 billion bushels, up 2 percent from last year. Harvested acreage was forecast at a record-high 88.7 million acres, unchanged from the June forecast but up 7 percent from 2016. Based on Aug. 1 conditions, yields are expected to average 49.4 bushels per acre, down 2.7 bushels from last year. If realized, the forecasted yield will be a record high in Delaware, Georgia, Kentucky, Missouri, Mississippi, Pennsylvania and South Carolina.
With higher production and lower beginning stocks, soybean supplies for 2017-2018 were projected at 4.777 billion bushels, up 2 percent from last month. Soybean ending stocks were projected at 475 million bushels, up 15 million bushels from last month.
The 2017-2018 U.S. season-average soybean price is forecast in a wide range of $8.45 to $10.15 per bushel, or $9.40 per bushel at the midpoint. The 2016-2017 average was $9.50 per bushel.
Season-average 2017-2018 soybean meal prices are forecast at $295 to $335 per ton ($315 per ton midpoint), down slightly from last month’s projections. The soybean meal price averaged $320 per ton in 2016-2017.
USDA numbers surprising
While the survey-based estimates of crop yields did show yield declines from 2016, it’s a major surprise that yields were as high as they were, according to John Newton, director of Market Intelligence with the American Farm Bureau Federation. Prior to the report’s release, trade estimates put corn yields at an average of 166.2 bushels per acre, with total production at 13.855 billion bushels. Trade estimates for soybeans pointed to 4.212 billion bushels, with an average crop yield of 47.5 bushels per acre.
“With the 2017-2018 crop still in the ground, a significant amount of uncertainty remains,” Newton said. “Given that many fields are far from maturity, these yields and production numbers are subject to revision in the coming months. As more information is revealed about the size of the 2017 crop, attention will then turn to the pace of corn and soybean consumption to derive price expectations throughout the marketing year. With production in line with trend estimates, however, it’s going to take a supply shock elsewhere in the world or substantial boost in consumption to push crop prices back toward their 2011-to-2013 levels.”
Cottonseed harvest largest in 10 years
With a substantial increase in cotton acreage and improving yields, dairy farmers should find more available cottonseed available. USDA raised the cottonseed harvest to 6.479 million tons, which would make it the largest cottonseed harvest since 2007.
Dry hay: Alfalfa yields take a hit
Production of alfalfa and alfalfa-mixture dry hay for 2017 is forecast at 56.2 million tons, down 4 percent from 2016. Based on Aug. 1 conditions, yields are expected to average 3.28 tons per acre, down 0.17 ton from last year. Harvested area is forecast at 17.1 million acres, unchanged from the June forecast but up 1 percent from 2016.
Montana, North Dakota and South Dakota, the top three states in area of alfalfa and alfalfa mixtures in 2017, have experienced drought conditions this year. As a result, each of these states are expecting lower yields than in 2016. Record-high yields are expected in Arizona, Idaho and Oregon in 2017.
Production of other hay is forecast at 76.4 million tons, down less than 1 percent from 2016. Based on Aug. 1 conditions, yields are expected to average 2.1 tons per acre, up 0.01 ton from last year. If realized, the 2017 average yield will be a record high for the U.S. Harvested area is forecast at 36.4 million acres, unchanged from the June forecast but down less than 1 percent from 2016.
Outside of the drought stricken states of Montana, North Dakota and South Dakota, limited hay acres have experienced drought conditions this year. As a result, Idaho, Missouri, North Carolina and Texas are expecting record-high yields. 
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Dave Natzke
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