Three of the five largest dairy states saw May 2017 milk production decline from May 2016, but overall U.S. production was up 1.8 percent, according to the USDA’s monthly Milk Production report. Output was down in California, Idaho and Wisconsin, mostly attributed to less milk per cow.
USDA: May recap
Reviewing numbers for May 2017 compared to May 2016:
• U.S. milk production: 18.94 billion pounds, up 1.8 percent
• U.S. cow numbers: 9.393 million, up 71,000 head
• U.S. average milk per cow per month: 2,016 pounds, up 19 pounds
• 23-state milk production: 17.75 billion pounds, up 1.8 percent
• 23-state cow numbers: 8.722 million, up 81,000 head
• 23-state average milk per cow per month: 2,035 pounds, up 16 pounds
Despite a U.S. cow herd with 71,000 more cows than a year ago, production growth has been tempered by less milk output per cow, according to Bob Cropp, dairy economics professor emeritus at the University of Wisconsin-Madison. Eight of the top 23 states saw May milk output per cow slip below year-ago levels. Milk production was down 1.1 percent in California, 0.7 percent in Wisconsin and 0.2 percent in Idaho. California’s decline was due to both fewer cows and less milk per cow, and Idaho’s declines were due to less milk per cow. Some of Wisconsin’s decline in milk per cow can be attributed to a continued phaseout in the use of recombinant bovine somatotropin (rbST), which is being banned by a majority of dairy processors.
May milk production growth even slowed somewhat in the Northeast and Midwest, where wet weather may be impacting forage quality as well as negatively affecting increases in milk per cow, Cropp noted.
IIn contrast, states in the West and Southwest experienced increases: Production was up 4.8 percent in Arizona, 6.9 percent in New Mexico and 14.7 percent in Texas.
Cow numbers increase
Nationally, cow numbers continue to rise. Based on preliminary May 2017 USDA estimates, U.S. dairy cow numbers were up 2,000 head since April and up 71,000 head since May 2016.
Once again, largest growth was in Texas, New Mexico, Colorado, Kansas and Michigan, up 87,000 head from a year earlier. California cow numbers were down 11,000 head.
Price outlook
May and June milk prices should reflect improvement, continuing to move higher into October and November, Cropp said in his monthly dairy outlook.
If growth in milk production continues at 2 percent or less, the Class III price could be in the mid $16s per hundredweight (cwt) by July, peaking in October in the high $17s, Cropp forecast. The Class IV price could be in the $17s beginning in August and stay there into later in the year.
Chicago Mercantile Exchange (CME) Class III milk futures are currently less optimistic, not reaching $17 per cwt until August and remaining in the low $17s for the remainder of the year.
USDA’s monthly Livestock, Dairy and Poultry Outlook and World Ag Supply and Demand Estimates report made further cuts to 2017 and 2018 U.S. milk production forecasts, with a slowdown in the growth of milk per cow offsetting expected gains in cow numbers. With the lower milk production, USDA raised projected 2017-18 milk prices.
Anticipated milk production in 2017 was cut by about 200 million pounds from last month’s forecast to 216.7 billion pounds. If realized, production would be up by about 2 percent from 2016’s total of 212.4 billion pounds. Cow numbers are expected to average 9.395 million head for the year, while milk per cow is forecast to average 23,065 pounds, up just 290 pounds from 2016.
Projected 2017 Class III prices were raised to a range of $16.35-$16.75 per cwt; Class IV prices were forecast in a range of $15.25-$15.75 per cwt. The all milk price is forecast at $17.80 to $18.20 per cwt for 2017.
The milk production forecast for 2018 was reduced 300 million pounds from last month to 221.7 billion pounds. If realized, 2018 production would be up by about 2.3 percent from 2017’s estimate.
Projected 2018 Class III prices were raised to a range of $16.75-$17.75 per cwt; Class IV prices were forecast in a range of $15.25-$16.35 per cwt. The all milk price is forecast at $18.10 to $19.10 per cwt for 2018.
Cow numbers are expected to continue to climb, averaging 9.435 million head for the year.
June margins mixed
Dairy farmer margins were mixed over the first half of June, deteriorating in the third quarter of 2017 while holding steady in deferred periods, according to Commodity & Ingredient Hedging LLC.
Milk prices continue drawing support from strength in dairy product values, particularly cheese and butter. Meanwhile, feed prices have been creeping higher due to weather concerns in the Corn Belt. Recent hot weather has reduced topsoil moisture, particularly in the western Midwest, and rainfall has been below normal. Although it's still early, concerns will grow if hot weather and below-normal rainfall continues into July during pollination.
Global Dairy Trade index dips
Led by a weaker-than-expected whole milk powder price, Global Dairy Trade (GDT) auction prices declined 0.8 percent on June 20, ending a six-session rise. The price for cheddar cheese was also down, offsetting increases for butter, skim milk powder and others. The next GDT auction is July 4.
Webinars planned
Publicly available webinars providing insights on potential directions of dairy and feed markets are scheduled next week. Alan Zepp, risk management program manager at Pennsylvania's Center for Dairy Excellence (CDE), will review dairy markets during the his monthly “Protecting Your Profits” call, June 28 beginning at noon (Eastern).
The calls review current market conditions and use of the Margin Protection Program for Dairy (MPP-Dairy), the Livestock Gross Margin-Dairy (LGM-Dairy) program and puts and options on the Chicago Mercantile Exchange (CME) futures market to manage risk. Calls are recorded and posted on the CDE website under the “Dairy Information” tab for those who are unable to join the live session. To register and obtain the conference line information, please call 717-346-0849, or email Melissa Anderson.
With USDA releasing Acreage and Grain Stocks reports on June 30, University of Illinois marketing specialists Todd Hubbs, Scott Irwin and Darrel Good will update supply, demand and price prospects for corn and soybeans. The webinar will be held June 30, 1-2 p.m. (Central). Click here for registration information. 
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Dave Natzke
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