Cheese, Dry Whey, NDM Prices Expected To Rise Next Year On Stronger Demand; Butter Prices Are Forecast Lower

Washington—The US Department of Agriculture (USDA), in its first calendar-year 2017 projections for dairy markets, is forecasting higher milk production as well as higher prices for milk and most dairy products.

USDA’s monthly supplydemand estimates, released Tuesday, also present the agency’s initial assessment of US and world crop supply and demand prospects, and US prices for 2016/17. Due to spring planting still underway in the Northern Hemisphere and being several months away in the Southern Hemisphere, USDA described these projections as “highly tentative.”

For this year, milk production is forecast higher than last month, as the cow inventory is expected to expand slightly and growth in milk per cow during the first half of the year is forecast higher. USDA is now projecting that 2016 milk production will reach a record 212.4 billion pounds, up 600 million pounds from last month’s forecast and 3.8 billion pounds higher than 2015’s record output.

Dairy imports for this year are raised on both a fat and skim solids basis, while exports on a fat basis are raised but unchanged on a skim-solids basis.

Cheese, butter and nonfat dry milk prices for 2016 are forecast lower on weaker demand and larger supplies, but dry whey prices are raised. USDA is now projecting that cheese prices this year will average $1.4550 to $1.5050 per pound, butter prices will average $1.9850 to $2.0650 per pound, nonfat dry milk prices will average 74.0 to 78.0 cents per pound and dry whey prices will average 23.5 to 26.5 cents per pound.

Both Class III and Class IV prices for 2016 are reduced. USDA now projects that the Class III price will average $13.15 to $13.65 per hundredweight, while the Class IV price is projected to average $12.65 to $13.25 per hundred. The all milk price forecast is also lower, at $14.60 to $15.10 per hundredweight.

US milk production for 2017 is forecast higher as improved forage availability and continued favorable feed costs are expected to support gains in milk per cow, USDA stated. Milk cow numbers are expected to remain near 2016 levels.

The agency is projecting 2017 milk production at 215.2 billion pounds, up 2.8 billion pounds from its latest projection for 2016 milk production.

Commercial dairy exports on both a fat and skim-solids basis are forecast higher next year as expected tighter world supplies and increasing demand lead to expanded export opportunities. Dairy imports are forecast lower as US domestic production increases.

With stronger domestic and export demand, USDA increased its forecasts for cheese, nonfat dry milk and dry whey prices, but lowered its forecast for butter prices.

Cheese prices next year are projected to average $1.5400 to $1.6400 per pound, while butter prices are projected to average $1.8800 to $2.0100 per pound, NDM prices are projected to average 85.5 to 92.5 cents per pound and dry whey prices are projected to average 25.5 to 28.5 cents.

The Class III price is forecast higher for next year on stronger cheese and dry whey prices. USDA is projecting a Class III price average of $14.05 to $15.05 cwt.

Class IV milk price forecast higher, at $13.15 to $14.25 per hundred, as a weaker butter price is more than offset by the higher NDM price. And the all milk price is forecast higher than in 2016, at $15.25 to $16.25 per hundred.

US feed grain supplies for 2016/17 are projected up 4 percent from the 2015/16 record, with increases in both beginning stocks and production. Corn for 2016/17 is projected at 14.4 billion bushels, up 829 million from 2015/16 and 214 million higher than the previous record in 2014/15.

A 5.6-million-acre increase in corn plantings more than offsets a small reduction in yield, USDA explained. The US corn yield is projected at 168.0 bushels per acre, down 0.4 bushels from 2015/16. Corn supplies for 2016/17 are projected at a record 16.3 billion bushels, up 886 million from 2015/16.

US corn use for 2016/17 is projected at a record 14.1 billion bushels, 4 percent higher than for 2015/16. Feed and residual use is projected 300 million bushels higher with higher production, lower expected prices, and further expansion in animal numbers in 2016/17.

Corn used to produce ethanol is projected 50 million bushels higher than in 2015/16 with a reduction in sorghum use for ethanol and higher expected ethanol blending.

Corn ending stocks for 2016/17 are projected at 2.2 billion bushels, up 350 million from the 2015/16 projection. If realized, stocks would be the highest since the mid- 1980s; however, the stocks-to-use ratio remains far lower than in those years when domestic policies ballooned stocks to more than 50 percent of annual usage.

The season-average 2016/17 farm price for corn is projected at $3.05 to $3.65 per bushel, down 25 cents at the midpoint from this month’s slightly higher outlook for 2015/16.