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Weekly Digest: USDA outlook sees deeper milk production cuts

Dave Natzke

November 9, 2021

The USDA’s World Ag Supply and Demand Estimates (WASDE) report reduced milk production forecasts and raised projected milk prices. With the outlook for average corn and soybean meal prices steady, milk income margins should improve.

Released on Nov. 9, the WASDE report cut milk production forecasts on expectations of lower cow numbers and slower growth in milk output per cow. This month, the cuts were much deeper than recent forecasts.

For 2021, the USDA forecasts milk production at 226.4 billion pounds, down 400 million pounds from last month’s estimate and down more than 2 billion pounds from the forecast released in June. If realized, 2021 production would be up about 1.4% from 2020.

Looking into next year, 2022 milk production was forecast at 228.1 billion pounds, down 1.6 billion pounds from last month’s forecast and 3 billion pounds less than the June forecast. If realized, 2022 production would be up about 0.8% from the 2021 forecast.

Compared to a month ago, 2021 price projections were raised for butter, nonfat dry milk and dry whey based on strength in demand and lower expected production. The cheese price forecast for 2021 was reduced slightly due to continued large supplies. As a result, the projected 2021 Class III milk price was cut 10 cents from last month’s forecast to $16.95 per hundredweight (cwt). In contrast, at $16 per cwt, the Class IV price forecast was raised 30 cents. Based on those averages, the 2021 all milk price was forecast a nickel higher at $18.50 per cwt.

For 2022, price forecasts for all dairy products were raised based on strength in demand and lower expected milk supplies. The projected Class III milk price was raised 65 cents to $17.75 per cwt, with the Class IV price projected $1.55 higher at $18.70 per cwt. The all-milk price forecast for 2022 is $20.25 per cwt, up $1.05 from a month ago.

  • Beef outlook: The 2021 beef production forecast was raised from last month, with higher expected slaughter of fed cattle and heavier carcass weights. The total 2022 production estimate was also raised.

Cattle price forecasts for 2021 and 2022 were raised on continued firm demand.

Compared to last month’s forecast, projected 2021 annual average prices for fed cattle were raised by 25 cents to $121.30 per cwt. The fourth-quarter 2021 average price was forecast at $128 per cwt, up $1 from last month’s forecast. The price outlook for 2022 was raised $1 to $130 per cwt, with highest prices in the first quarter of the year.

In addition to WASDE supply and demand estimates, feed supply and cost projections, the USDA also released the November Crop Production report, Nov. 9, updating 2021 yield and production estimates. Here’s a summary:

  • Corn: Compared to a month ago, the 2021-22 U.S. corn outlook calls for greater production, increased corn used for ethanol and marginally lower ending stocks.

Latest corn production estimates forecast the harvested area at 85.1 million acres, up about 3% from last year. The forecast yield, at a record high 177 bushels per acre, is also up 3% from last year. Those two factors create a 2021 corn harvest of 15.06 billion bushels, up 7% from last year and the second highest production on record for the U.S.

With use rising slightly more than supply, corn ending stocks were lowered 7 million bushels. That didn’t change the price outlook, however. At $5.45 per bushel, the projected season-average corn price received by producers was unchanged from last month. That would be about 92 cents (20%) more than 2020-21 average of $4.53 per bushel and $1.89 (53%) more than the 2019-20 average of $3.56 per bushel.

  • Soybeans: The 2021-22 U.S. soybean supply and use outlook calls for lower production and exports and higher ending stocks.

Soybean production was forecast at 4.42 billion bushels, down 1% from the previous forecast but up 5% from last year. Based on conditions as of Nov. 1, yields were expected to average 51.2 bushels per harvested acre, up 0.2 bushel from 2020. Area harvested for beans was forecast at 86.4 million acres, unchanged from the previous forecast but up 5% from the previous year.

At $12.10 per bushel, the projected U.S. season-average soybean price received by producers is down 25 cents from last month’s forecast but would be up $1.30 (12%) from the 2020-21 average of $10.80 per bushel and $3.53 (41%) more than the 2019-20 average of $8.57 per bushel. The projected soybean meal price was forecast at $325 per ton, unchanged from the previous month. If realized, it would be down $67.30 from the 2020-21 average but still up more than $25 per ton from 2019-20.

  • Hay and forage: The USDA’s latest Crop Production report did not include updates on dry hay or forage production. September (the latest available) monthly U.S. average prices for Premium and Supreme dairy-quality alfalfa hay jumped $6 from August to $244 per ton and was up $52 per ton from a year ago. It’s the highest average recorded since the USDA began compiling dairy-quality hay prices in 2019.

  • Cottonseed: The USDA boosted the size of this year’s cottonseed harvest. The 2021 cottonseed crop is now forecast at 5.549 million tons, up about 1.04 million tons (23%) from 2020.

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