USDA milk production, price and feed cost projections raised again
November 10, 2020
The USDA’s November World Ag Supply and Demand Estimates (WASDE) report raised milk production and price forecasts for both 2020 and 2021. For dairy producers, those milk price gains will likely be offset by higher projected feed costs.
Outlook for 2020
The outlook for increased milk production is based on stronger growth in milk per cow and higher expected dairy cow inventory. Milk production for 2020 was forecast at 222.5 billion pounds, up 200 million pounds from last month’s estimate. If realized, milk production would be up about 1.9% from 2019’s total of 218.4 billion pounds.
Annual average cheese, nonfat dry milk (NDM) and whey price forecasts for 2020 were raised from last month; the butter price forecast was reduced slightly. As a result, the Class III price forecast was raised 55 cents from a month earlier to $18.55 per hundredweight (cwt), while the Class IV price was unchanged at $13.50 per cwt. The projected 2020 all-milk price was raised 25 cents from last month to $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 Nov. 9, the 2020 Class III price would average about $18.45 per cwt, while the Class IV price would average about $13.53 per cwt.
Looking ahead to 2021
For 2021, the USDA raised the overall production forecast to 225.9 billion pounds, up 400 million pounds from last month’s estimate. If realized, it would be up about 1.5% from 2020’s estimate.
The USDA continues to project somewhat lower milk prices in 2021, although estimates were up from a month earlier. Most of the decline is attributed to weaker cheese and Class III milk prices. The 2021 all-milk price was forecast at $17.70 per cwt, the Class III price at $17.25 per cwt and the Class IV price at $14 per cwt.
Compared to current futures prices, the USDA 2021 price outlook is higher than the CME Class III average but well below the CME Class IV average. As of the close of trading on Nov. 9, 2021, CME Class III futures prices averaged $16.69 per cwt for the year; Class IV futures prices averaged $15.31 per cwt.
Beef outlook sees little change
The forecast for 2020 and 2021 beef production was raised from the previous month on higher expected slaughter of both fed and non-fed cattle.
However, the 2020 and 2021 cattle price forecasts were unchanged from last month, strengthening in the fourth quarter of 2020 and into 2021.
Feed costs to rise
Feed cost projections incorporated supply and demand estimates from the WASDE report, as well as the November Crop Production report. Both indicate dairy feedstuff prices are headed higher.
Corn: This month’s 2020-21 U.S. corn outlook was for lower production, reduced feed and residual use, larger exports and smaller ending stocks.
Corn production is forecast at 14.5 billion bushels, down 1% from the previous forecast but up 7% from 2019 and the third-highest production on record. Based on conditions as of Nov. 1, yields are expected to average 175.8 bushels per harvested acre, down 2.6 bushels from the previous forecast but up 8.3 bushels from last year and also be the third-highest yield on record. Area harvested for grain is forecast at 82.5 million acres, unchanged from the previous forecast, but up 1% from the previous year.
With supply falling and use increasing, corn ending stocks for 2020-21 are down 465 million bushels to 1.7 billion, which if realized would be the lowest since 2013-14.
The projected 2020-21 season-average corn price received by producers was raised 40 cents from last month’s forecast to $4 per bushel.
Soybeans: The U.S. soybean outlook for 2020-21 is for lower production and ending stocks.
Soybean production is forecast at 4.17 billion bushels, down 2% from the previous forecast but up 17% from last year. Based on conditions as of Nov. 1, yields are expected to average 50.7 bushels per harvested acre, down 1.2 bushels from the previous forecast but up 3.3 bushels from 2019. Area harvested is forecast at 82.3 million acres, unchanged from the previous forecast but up 10% from 2019.
With reduced production, soybean ending stocks are projected at 190 million bushels, down 100 million from last month. If realized, soybean ending stocks would be at the lowest level in the past seven years.
The U.S. season-average soybean price received by producers for 2020-21 was estimated at $10.40 per bushel, up 60 cents from last month’s forecast and about $1.80 more than the 2019-20 average. The projected soybean meal price was raised $20 from last month’s forecast to $355 per ton, which would be $56 more than the 2019-20 average.
Hay: The latest crop report did not provide updates on the 2020 hay crop.
Cottonseed: Although acreage estimates were unchanged from last month, the cotton production outlook was marginally higher. As a result, the 2020 cottonseed crop was estimated at 5.23 million tons, down 715,000 tons (12%) from 2019. If realized, it would be the smallest cottonseed harvest since 2015.