The USDA’s April Livestock, Dairy and Poultry report left 2018 milk production projections unchanged, at 219 billion pounds. If realized, it would be up 1.6 percent from 2017. The USDA’s March 2018 Milk Production report will be released April 20.
Based on current estimates, USDA projected the following 2018 averages (midpoint of range): Class III – $14.45 per hundredweight (cwt); Class IV – $13.55 per cwt; all milk – $15.85 per cwt. Those averages would be down from 2017 and are now lower than prices seen in 2016. For the first quarter of 2018, average prices were: Class III – $13.87 per cwt; Class IV – $13.01 per cwt; and all milk – $15.55 per cwt.
The estimate for the size of the 2018 milking herd is unchanged from the March forecast, at 9.415 million head, as growth is expected to taper off later in the year. The forecast for milk per cow in 2018 has been raised slightly to 23,260 pounds, as year-over-year growth was higher than expected in January and February.
Beef outlook
The USDA lowered its 2018 beef production forecast, based on lower first-half slaughter and lighter weights, but this decline is partly offset by higher expected third-quarter slaughter. Projected cattle prices price forecasts were reduced from last month as demand for cattle has softened and supplies are expected to be large in the coming quarters. Highest cattle prices for the year are already behind us. U.S. cutter cow prices averaged $61.60 per cwt in the first quarter of 2018 and are expected to stay in a range of $60 to $65 per cwt for the year.
Feed outlook
On the feed side of the equation, this month’s 2017/18 U.S. corn outlook is for reduced feed and residual use, slightly lower food, seed and industrial use, all leading to increased ending stocks. As a result, the USDA’s World Ag Supply and Demand Estimates (WASDE) report narrowed projected corn prices. Marketing year 2017-18 prices paid to corn growers are forecast in a range of $3.20 to $3.50 (midpoint $3.35) per bushel, compared to $3.36 per bushel in 2016-17.
Anticipated U.S. soybean supply and use changes for 2017/18 include increased crush, lower seed and residual use, and lower ending stocks. Soybean crush is projected at a record 1.97 billion bushels, reflecting higher soybean meal prices, which are supporting crush margins. Projected 2017-18 marketing year prices paid to growers narrowed to a range of $9.10 to $9.50 ($9.30 midpoint) per bushel, compared to $9.47 per bushel in 2016-17. However, soybean meal prices were forecast in a range of $340 to $360 ($350 per ton midpoint, up $30 over the past two months), compared to $317 per ton in 2016-17.
The USDA report did not change a single item on the cottonseed supply and demand report, according to Nigel Adcock with Cottonseed LLC. Cottonseed markets were mainly unaffected by the report, although most traders still feel the USDA has the crush numbers pegged too high. The USDA may be looking at the crush margins as reason to continue a strong crush program, while the trade feels that oil mills do not have capacity to pick up the pace to achieve that goal or the desire given the recent crash in both cottonseed meal and hulls prices. Cottonseed prices also had the feel they could soften a little after failing to continue the momentum seen these past couple of weeks, Adcock said.
Too early to worry about corn acreage?
Recent unseasonably cold and wet weather over much of the Corn Belt precipitates speculation into the prospect of reduced corn acreage this year. The prospect of planting delays raises questions about the likely magnitude of final corn acreage and the possible impact on yields, according to Todd Hubbs, ag economist with the University of Illinois. With March's USDA Prospective Plantings report estimating 88 million acres, a reduction in corn acreage under the recent strong demand levels for corn creates a scenario for higher corn prices moving forward.
It is too early to write off corn acreage at this point, but continued delays narrow the window for planting without the prospect of yield losses. Expectations about corn acreage will gain a more accurate assessment in the USDA's Acreage report, released June 29.
Margins improve to start April
Dairy margins improved slightly since the end of March as milk prices continued to recover while feed costs held steady, according to Commodity & Ingredient Hedging LLC. Milk prices drew support from strong exports and indications that milk production may be slowing in the months ahead.
U.S. dairy exports reached an all-time high for the month of February on a daily average basis. However, while depressed milk prices have clearly stimulated export demand, they are negatively impacting U.S. production prospects.
Since the middle of February, dairy cow slaughter is running 7.5 percent above the same six-week period in 2017.
The USDA’s Dairy Market News indicated “there were more reports of dairy farmers opting to auction their herds and exit the business.” The report noted that a number of larger farms were closing this month in the Midwest. It also mentioned that lenders are taking a cautious approach to credit ahead of the planting season, “which some contacts suggest could lead to more closures and potentially less milk production.”
May California Class 1 prices in upward
After reversing a four-month slide in April, California Class prices posted small gains for May. The California Department of Food and Agriculture (CDFA) announced the May Class 1 price at $16.09 per cwt for the north and $16.36 for the south. Both are 12 cents more than April 2018, but 56 cents less than May 2017. Through the first five months of 2018, the north average is $15.76 per cwt; the south average is $16.03 per cwt. They are about $2.03 per cwt less than the same period in 2017.
May Class I base price rises
The May 2018 Federal Milk Marketing Order (FMMO) Class I base price is $14.44 per cwt, rebounding 34 cents from April. The May 2018 price is 76 cents less than May 2017’s price of $15.20 per cwt.
Through the first five months of 2018, the Class I base average is $14.32 per cwt, about $2.15 less than the average for the same period in 2017.
Global Dairy Trade Index rises
Global Dairy Trade (GDT) dairy product prices took a nice jump in the auction held April 17, with the overall index up 2.7 percent. Prices were higher for all major products offered, including cheddar cheese [up 4.6 percent, to $3,855 per metric ton (MT)]; butter [up 2.9 percent, to $5,654 per MT]; whole milk powder [up 0.9 percent, to $3,311 per MT]; and skim milk powder [up 3.6 percent, to $1,913 per MT].
The next GDT auction is May 1. 
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Dave Natzke
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