On the eve of the enrollment deadline for the 2021 Dairy Margin Coverage (DMC) program, the USDA raised milk production forecasts for both 2020 and 2021, with 2021 milk price projections reduced substantially. Higher anticipated prices for soybean meal are expected to drive feed costs up as well.
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Dave Natzke
Editor / Progressive Dairy

As of Dec. 10, the USDA had not budged from the Dec. 11 deadline for 2021 DMC enrollment. Jim Mulhern, president and CEO of the National Milk Producers Federation (NMPF) had requested an deadline extension, but said USDA Farm Service Agency (FSA) Administrator Richard Fordyce had denied that request. Dairy producers who want to enroll must call their FSA office before the close of business on Dec. 11.

According to a memo distributed late Thursday, Fordyce indicated that sign-ups received as of Dec. 8 were ahead of last year’s totals. In addition, he said, FSA offices have already contacted dairy operations with production histories multiple times to remind them of this week’s deadline.

Read also: Last call: Missing 2021 DMC sign-up is risky.

Outlook weakens

The dairy outlook, included in the December World Ag Supply and Demand Estimates (WASDE) report, forecasts milk production increases due to growing dairy cow inventories in both 2020 and 2021.

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Milk production for 2020 was forecast at 222.7 billion pounds, up 200 million pounds from last month’s estimate. If realized, milk production would be up more than 1.9% from 2019’s total of 218.4 billion pounds.

Annual average cheese and butter prices were reduced, offsetting a rise in the projected whey price; the outlook for nonfat dry milk (NDM) was unchanged from last month.

As a result, the Class III price forecast was reduced 35 cents from a month earlier to $18.20 per hundredweight (cwt), while the Class IV forecast price was reduced a nickel to $13.45 per cwt. The projected 2020 all-milk price was unchanged from last month at $18.25 per cwt.

The USDA 2020 price outlook was in line with current Class III and Class IV futures prices. Using Chicago Mercantile Exchange (CME) futures prices at the close of trading on Dec. 10, the 2020 Class III price would average about $18.17 per cwt, while the Class IV price would average about $13.50 per cwt.

Looking ahead to 2021

For 2021, the USDA raised the overall production forecast to 226.3 billion pounds, up 400 million pounds from last month’s estimate. If realized, it would be up about 1.6% from 2020’s estimate.

The outlook for 2021 milk prices weakened substantially from last month’s projections, primarily due to a large drop in cheese prices. The all-milk price was cut $1.10 to $16.60 per cwt, the Class III price was reduced $1.65 to $15.60 per cwt and the Class IV price was cut 40 cents to $13.60 per cwt.

Due to a recent improvement in 2021 CME milk futures prices, the USDA 2021 price outlook is lower than current futures prices. As of the close of trading on Dec. 10, 2021 CME Class III futures prices averaged $17.24 per cwt for the year; Class IV futures prices averaged $15.67 per cwt.

Beef outlook

The 2020 beef production forecast was raised as higher non-fed cattle slaughter more than offsets lighter expected cattle carcass weights. The forecast for 2021 beef production was reduced on lower expected fed and non-fed cattle slaughter in the first half of the year.

The 2020 fed cattle price forecast was unchanged from last month at about $108 per cwt; the 2021 average price was forecast at $115 per cwt, up $1 from last month’s forecast.

Soy costs to rise

Feed cost projections incorporated supply and demand estimates from the WASDE report. While the outlook for corn held steady, soybean and soybean meal prices rose.

  • Corn: This month’s 2020-21 U.S. corn supply and use outlook was unchanged from last month. At $4 per bushel, the projected 2020-21 season-average corn price received by producers was unchanged from last month’s forecast and would be about 44 cents more than 2019-20.

  • Soybeans: Total U.S. soybean ending stocks for 2020-21 are projected at 175 million bushels. If realized, ending stocks would be the lowest since 2013-14. The U.S. season-average soybean price received by producers for 2020-21 was estimated at $10.55 per bushel, up 15 cents from last month’s forecast and about $2 more than the 2019-20 average. The projected soybean meal price was raised $15 from last month’s forecast to $370 per ton, which would be $70 more than the 2019-20 average.

  • Cottonseed: The USDA’s Crop Production report made a rather substantial cut in the size of the cottonseed crop, mainly due to a 900,000-bale reduction in the Texas cotton crop. As a result, the 2020 cottonseed crop was estimated at 4.89 million tons, down more than 1 million tons (18%) from 2019. If realized, it would be the smallest cottonseed harvest since 2015.

  • Hay: The latest crop report did not provide updates on the 2020 hay crop.  end mark
Dave Natzke