The U.S. Department of Agriculture’s November World Ag Supply & Demand Estimates (WASDE) report reduced 2016 and 2017 milk production forecasts after adjusting cow numbers lower. Offsetting lower cow numbers, output per cow is expected to climb.
With the slowdown in U.S. production and other global factors, price forecasts were raised slightly.
Anticipated milk production in 2016 was cut about 200 million pounds from last month’s forecast, to 212.5 billion pounds. If realized, production would be up about 1.8 percent from 2015.
Looking ahead to 2017, milk production was projected 300 million pounds lower than last month’s forecast, to 217.0 billion pounds. If realized, production would be up about 2.1 percent from 2016’s estimate.
Projected fat-basis exports were lowered for 2016 and 2017 due to slower sales of cheese and whole milk powder. On a skim-solids basis, exports for 2016 were forecast lower due to weaker sales of milk protein concentrates and whey.
Cheese and whey price forecasts for 2016 and 2017 were raised. Nonfat dry milk (NDM) price projections were lowered for 2016, but expected to strengthen in 2017. Butter prices were forecast to be weaker through 2016 and 2017.
As a result, Class III price projections were raised for both 2016 and 2017. However, lower butter prices are expected to more than offset higher NDM prices, and Class IV prices were projected lower for both years. All milk prices were forecast higher, at $16.00-$16.10 per hundredweight (cwt) for 2016 and $16.30-$17.20 per cwt for 2017.
Milk price forecasts (dollars per cwt)
Class III
2015 – $15.80
2016 – $14.70-$14.80
2017 – $15.30-$16.20
Class IV
2015 – $14.35
2016 – $13.55-$13.75
2017 – $13.55-$14.55
All-milk
2015 – $17.12
2016 – $16.00-$16.10
2017 – $16.30-$17.20
Dairy product price forecasts (dollars per pound)
Cheese
2015 – $1.65
2016 – $1.59-$1.60
2017 – $1.61-$1.70
Butter
2015 – $2.07
2016 – $2.04-$2.07
2017 – $1.81-$1.93
Nonfat dry milk
2015 – $0.90
2016 – $0.82-$0.84
2017 – $0.93-$1.00
Dry whey
2015 – $0.38
2016 – $0.28-$0.29
2017 – $0.36-$0.39
Beef outlook
Impacting cull cow prices, the WASDE report raised the forecast for 2016 and 2017 beef production due to an increased pace of slaughter and heavier carcass weights. Cattle prices are forecast lower for the remainder of 2016 and into 2017. Projected average 2016 fed cattle prices were reduced to $120 per cwt, but just $102-$106 per cwt in the fourth quarter; 2017 prices were forecast in a range of $102-$110 per cwt, $10-$11 per cwt less than last month’s forecast.
Feed outlook
Combined with the WASDE report, USDA also released its monthly Crop Production report, providing a glimpse of potential impacts on the dairy feed side of the ledger.
U.S. corn production was forecast at 15.2 billion bushels, up 1 percent from the October forecast and up 12 percent from last year. Area harvested for grain was forecast at 86.8 million acres, up 8 percent from 2015.
Based on conditions as of Nov. 1, yields were expected to average 175.3 bushels per acre, up 1.9 bushels from the October forecast and up 6.9 bushels from 2015. If realized, this will be the highest yield and production on U.S. record. Record yields are forecast for Idaho, Illinois, Iowa, Minnesota, North Carolina, North Dakota, South Carolina, Washington and Wisconsin.
The higher corn production is offset by higher food, seed and industrial use, leading to higher prices. The projected range for the season-average corn price received by producers was raised a nickel on both ends, to $3.00 to $3.60 per bushel.
U.S. soybean production is forecast at a record 4.36 billion bushels, up 2 percent from October and up 11 percent from last year. Area for harvest was forecast at a record 83.0 million acres, unchanged from last month.
Based on Nov. 1 conditions, yields are expected to average a record 52.5 bushels per acre, up 1.1 bushels from last month and up 4.5 bushels from last year. If realized, the forecasted yield will be a record high in Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin.
With the higher production, the WASDE report forecast higher ending stocks. However, the U.S. season-average soybean price for 2016-17 was projected at $8.45-$9.95 per bushel, up 15 cents on each end of the range. Soybean meal price projections were raised $5 per ton on each end of the range, to $305 to $345 per ton.
Feed price forecasts
Corn (dollars per bushel)
2014/15 – $3.70
2015/16 – $3.61
2016/17 – $3.00-$3.60
Soybeans (dollars per bushel)
2014/15 – $10.10
2015/16 – $8.95
2016/17 – $8.45-$9.95
Soybean meal (dollars per ton)
2014/15 – $368
2015/16 – $325
2016/17 – $305-$345
Other crops
USDA’s Crop Production did not update hay harvest forecast. The cottonseed forecast was adjusted slightly higher to 5.16 million tons, about 50,000 tons more than last month’s forecast. 
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Dave Natzke
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