The USDA’s latest World Ag Supply and Demand Estimates (WASDE) report, released May 12, raised the 2021 milk production forecast due to higher cow numbers, but the outlook for milk prices also brightened somewhat.
For 2021, the USDA forecasts milk production to reach 227.9 billion pounds, up 200 million pounds from last month’s estimate. If realized, 2021 production would be up about 2% from 2020.
Projected 2021 product prices were raised from a month ago for cheese, nonfat dry milk and dry whey but lowered slightly for butter. As a result, the forecast for the Class III milk price was raised to $17.70 per hundredweight (cwt), up 60 cents from last month, while the Class IV average price was raised 60 cents to $15.75 per cwt. Both are below current annual average futures prices on the Chicago Mercantile Exchange (CME). The projected 2021 all-milk price was raised to $18.95 per cwt, up 45 cents from last month’s forecast and slightly above annual averages seen in 2019 and 2020.
In the USDA’s first look at 2022, milk production was forecast at 230.3 billion pounds, as continued gains in milk per cow more than offset a slight reduction in the dairy cow herd. If realized, 2022 production would be up about 1.1% from the 2021 forecast.
In its initial release of 2022 price projections, the USDA forecast higher butter prices, but lower prices for cheese, nonfat dry milk and dry whey. The forecast for the 2022 Class III milk price was cut to $16.85 per cwt, while the Class IV average price was reduced a nickel from 2021 to $15.70 per cwt. The projected 2022 all-milk price cut to $18.50 per cwt.
Beef outlook
The 2021 beef production forecast was raised on higher fed and non-fed cattle slaughter. The 2021 projected cattle price was unchanged from last month at about $116 per cwt, up about $8 from the 2020 average.
Feed costs higher
Based on WASDE supply and demand estimates, feed supply and cost projections included:
- Corn: This month’s 2021-22 U.S. corn supply, demand and price outlook calls for a projected harvest of 15 billion bushels, up from last year due to increased acreage and a return to trend yield. While beginning stocks are down sharply from a year ago, total corn supplies are forecast to increase modestly.
At $5.70 per bushel, the projected season-average corn price received by producers would be about $1.35 (31%) more than 2020-21 average of $4.35 per bushel.
- Soybeans: This month’s 2021-22 U.S. soybean supply, demand and price outlook calls for lower supplies, lower exports, higher crush and higher ending stocks compared with 2020-21. The soybean crop is projected at 4.4 billion bushels, up 270 million from last year on increased harvested area and trend yields.
With prices for fall delivery above $14 per bushel in some locations, the 2021-22 U.S. season-average soybean price received by producers for 2021-22 is estimated at $13.85 per bushel, up $2.60 (23%) from the 2020-21 average. Soybean meal prices are forecast at $400 per ton, down $5 from the revised forecast for 2020-21 but up more than $100 per ton from 2019-20.
University of Illinois and Ohio State University ag economists discussed the probabilities corn and soybean prices will decline in a recent farmdoc post. Current prices on 2021 harvest-time futures contracts are above $6 per bushel for corn and $14 per bushel for soybeans. Using an online price discovery tool, they indicate a 9% chance that corn prices will decline by more than $2 per bushel and a 20% chance of soybean prices declining by more than $2 per bushel.
Spring hay inventories lower
The USDA’s updated Crop Production report, also released May 12, contained little information regarding dairy feedstuffs. However, an estimate of hay inventories stored on farms as of May 1, 2021, indicated supplies were 12% lower than a year ago.
All hay stored on U.S. farms on May 1, 2021, totaled about 18 million tons, down 2.42 million tons from a year ago. The on-farm inventory was still the second-highest volume since 2017.
At 9.56 million tons, May 1 hay inventories among the 24 major dairy states were down 15% (1.7 million tons) compared to a year earlier. Seventeen of those states reported smaller inventories compared to a year earlier, led by Texas (-750,0000 tons), Kansas (-510,000 tons) and California (-200,000 tons). Inventories were also down 110,000 tons or more in Oregon, Utah, South Dakota and Colorado.
Dairy states in which hay inventories were larger than a year ago included Wisconsin (+260,000 tons), Virginia (+170,000 tons) and Georgia (+120,000 tons).
