U.S. Milk Production Projected Lower – Dec ’16
According to the December USDA World Agricultural Supply and Demand Estimate (WASDE) report, the 2016 U.S. milk production projection was reduced for the second consecutive month as slower growth in cow numbers more than offset higher growth in per cow productivity. 2016 projected milk production of 212.4 billion pounds was lowered by 0.1 billion pounds, finishing at a three month low. 2016 projected milk production equates to a 1.5% YOY increase from 2015 production levels when adjusted for leap year and a 2.1% implied YOY increase in milk production over the final two months of the year. Projected milk production is expected to increase an additional 2.4% throughout 2017 when adjusted for leap year, finishing at an estimated level of 216.8 billion pounds, down 0.2 billion pounds from the previous month’s projection.
Export forecasts were raised for 2016 on both a milkfat and skim-solids basis on higher butter and lactose exports, respectively. For 2017, milkfat exports were forecasted lower on expected increased competition in cheese markets, but strength in nonfat dry milk (NFDM) and lactose export volumes is expected to support higher skim-solids exports. The 2017 projected dairy export volumes translated to 14.7% of total U.S. milk solids production while import volumes were equivalent to 3.9% of total U.S. milk solids production. 2017 U.S. net dairy trade projections declined slightly for the second consecutive month during the December report.
Butter and cheese price forecasts were raised for 2016 on recent price strength however dry whey and NFDM prices were unchanged from the previous month. Product price forecasts were raised for 2017 as domestic demand strength is expected to carry into next year. The 2017 Class III price forecast increased $0.50/cwt from the previous month at the midpoint, finishing at $15.85-$16.65/cwt while the 2017 Class IV price forecast increased $0.60/cwt from the previous month at the midpoint, finishing at $14.20-$15.10/cwt. The 2017 projected All-Milk price of $16.85-$17.65/cwt was raised by $0.50/cwt at the midpoint, finishing 7.1% above 2016 price levels.
Export forecasts were raised for 2016 on both a milkfat and skim-solids basis on higher butter and lactose exports, respectively. For 2017, milkfat exports were forecasted lower on expected increased competition in cheese markets, but strength in nonfat dry milk (NFDM) and lactose export volumes is expected to support higher skim-solids exports. The 2017 projected dairy export volumes translated to 14.7% of total U.S. milk solids production while import volumes were equivalent to 3.9% of total U.S. milk solids production. 2017 U.S. net dairy trade projections declined slightly for the second consecutive month during the December report.
Butter and cheese price forecasts were raised for 2016 on recent price strength however dry whey and NFDM prices were unchanged from the previous month. Product price forecasts were raised for 2017 as domestic demand strength is expected to carry into next year. The 2017 Class III price forecast increased $0.50/cwt from the previous month at the midpoint, finishing at $15.85-$16.65/cwt while the 2017 Class IV price forecast increased $0.60/cwt from the previous month at the midpoint, finishing at $14.20-$15.10/cwt. The 2017 projected All-Milk price of $16.85-$17.65/cwt was raised by $0.50/cwt at the midpoint, finishing 7.1% above 2016 price levels.