The USDA’s July World Ag Supply and Demand Estimates (WASDE) report substantially reduced milk price outlooks for 2018 and 2019, while also cutting milk production estimates for both years. Although tempered by lower expected feed costs, lower milk prices will likely weaken producer margins, resulting in lower cow numbers and slower growth in milk per cow, according to the report.

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Dave Natzke
Editor / Progressive Dairy

The 2018 milk production estimate was cut 100 million pounds from last month’s forecast to 217.9 billion pounds. If realized, it would be up just 1.1 percent from 2017. Over the past three months, USDA had cut the 2018 milk production forecast by 1.1 billion pounds.

Based on current estimates, USDA reduced 2018 projected average prices (midpoint of range) about 70 cents per hundredweight (cwt) compared to a month ago. Projected annual average prices for 2018 are: Class III – $14.45 per cwt; Class IV – $13.85 per cwt; and all-milk – $16.10 per cwt. With the reductions, the projected average all-milk price for 2018 is now 20 cents below that seen in 2016.

For 2019, the USDA cut its July forecast to 220.6 billion pounds, about 900 million pounds from May’s forecast. If realized, it would be up 1.2 percent from the level forecast for 2018.

In its price projections for 2019, the USDA forecast (midpoint of range): Class III – $15.20 per cwt; Class IV – $14.20 per cwt; and all-milk – $16.76 per cwt. Those numbers look a lot like 2017.

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If 2018 and 2019 milk production estimates are realized, it would mark three straight years, and four of the last five years, that U.S. annual milk production grew less than 1.5 percent.

Coming: USDA’s Cattle report, to be released on July 20, will provide a midyear estimate of dairy cow inventories. The USDA’s June 2018 Milk Production report will be also released July 20.

Beef outlook

The USDA raised its 2018 beef production forecast again on higher expected cow slaughter in the third quarter. The 2019 beef production forecast was reduced on lower expected steer and heifer slaughter the first half of the year. Projected 2018 cattle prices were lowered slightly; 2019 projections were unchanged.

Feed outlook

This month’s 2018-19 U.S. corn outlook is for larger supplies, greater feed and residual use, increased exports and lower ending stocks. The average price forecast for the 2018-19 marketing year (midpoint of range) was cut a dime from last month to $3.80 per bushel. That would be about 40 cents per bushel higher than the projected 2017-18 marketing year average.

The 2018-19 outlook for U.S. soybeans is for lower supplies, lower exports, higher crush and higher ending stocks. Projected 2018-19 marketing year average prices paid to growers for soybeans were reduced about 75 cents per bushel on each end of the spectrum from last month in a wide range of $8-$10.50 per bushel.

Soybean meal prices are expected to average $335 per ton (midrange average) for 2018-19, down from $350 per ton in 2017-18.  end mark

Dave Natzke