September dairy situation and outlook

USDA’s August milk production estimates showed the smallest year-over-year increase in 2015, at 0.8%.
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That compares to a 1.3% increase for July. Milk cow numbers have held at 9.321 million for the past three months, down 3,000 from this year’s peak in May, but still 0.6% higher than a year ago. Milk per cow continues to show only a modest increase, at 0.3%. Milk production January through August is up 1.5% from a year ago.
Among regions and states, California’s production continues to run well below year ago, with August production down 3.4%. Cow numbers were down only 0.1%, but milk per cow was 3.4% lower. Of the 23 major dairy states, New Mexico had the biggest decline in production, down 4.3%, all due to less milk per cow. Texas’s production was also down 1.4%, due to 1.7% fewer cows and just 0.3% more milk per cow. Idaho’s production was up just 0.8%, due to 1.0% more cows, but 0.2% less milk per cow.
August production was up 2.5% for New York, 0.3% for Pennsylvania, and 4.1% for Michigan. Milk per cow was higher in each of those states; cow numbers were higher in New York and Michigan, but unchanged in Pennsylvania.
South Dakota continues to lead in the percentage increase in milk production, with August 2015 up 13.3% from a year earlier, thanks to 10.3% more cows and 2.7% more milk per cow. Iowa’s production was up 3.9%, due to 1.4% more cows and 2.4% more milk per cow. Minnesota had no change in cow numbers, but production was up 4.7%. Wisconsin had 0.7% more cows and 4.0% more milk per cow, resulting in 4.8% more production.
Florida’s production was 1.6% higher, due to 1.6% more cows, but 0.2% less milk per cow.
USDA forecasts total 2015 milk production to end up 1.4% higher than last year, and expects another 2.0% increase for 2016. However, this forecast is a little high if the increase in milk production per cow continues at less than 1.0%.
Price outlook
Even with milk production at these levels, and if exports do not to show much improvement prior to the second half of 2016, we can expect the Class III price to decline to the high $15s/cwt. for the remainder of 2015, and may be the low $15s first quarter of 2016 before prices slowly increase, reaching the $16s/cwt. by third quarter.
The Class IV price could be near $14/cwt. for November, but with expected declines in the butter price after holiday orders are filled, it could be in the $13s/cwt. by December, and even in the $12s/cwt. in the first quarter 2016, before slowly increasing by the second quarter. However, Class IV futures prices are more optimistic than this, and prices will depend heavily on any increase in exports.
Dairy product prices
September has been a mixed bag regarding dairy product prices on the Chicago Mercantile Exchange (CME). Butter, at $2.29/lb. the last week of August, has shown strength all of September, with the current price at $2.7175/lb. Nonfat dry milk, at 77¢/lb. the last week of August, has also shown some strength, and is now at 91¢/lb. With both butter and nonfat dry milk prices improving, the September Class IV price will be near $15.10/cwt. compared to $12.90/cwt. in August.
However, cheese and dry whey prices have weakened. The 40-lb. cheddar block price was $1.6575/lb. the last week of August, improved to $1.75/lb. on Sept. 1, but is now at $1.6925/lb. Cheddar barrels were $1.60/lb. the last week of August, improved to $1.67/lb. on Sept. 1, but  is now $1.5425/lb.. Dry whey, at 38¢/lb. in mid-August has fallen to 25¢/lb. With these lower prices, the September Class III price will be about $15.85/cwt., compared to $16.27/cwt. in August.
Dairy products, stocks
The latest Dairy Product report, for July, showed butter production 3.2% lower than a year ago. Cheddar cheese production was 4.7% higher; total cheese production 3.1% higher; nonfat dry milk production 6.9% lower; skim milk powder production 23.0% higher; and dry whey production 9.8% higher.
July 31 stocks compared to a year ago were: butter 40.7% higher; American cheese 5.1% higher; total cheese 6.7% higher; nonfat dry milk 8.5% higher; and dry whey 16.2% higher.
While restaurant and foodservice demand has been strong for butter and cheese, dairy exports are much lower. July exports compared to a year ago show butter exports down 58%; cheese down 21%; nonfat dry milk down 22%; and dry whey down 8%. Exports would be even lower if it wasn’t for the Cooperatives Working Together (CWT) program.
Dairy exports are not expected to improve prior to the second half of 2016. With the two largest importers of dairy products, China and Russia, importing much less than early in 2014 – along with the level of world milk production – world dairy stocks have built to surplus levels. World dairy product prices have fallen to levels not experienced since a decade ago, and well below U.S. prices. With higher U.S. prices, imports of butter and cheese have increased.
However, world prices appear to have bottomed out. Prices during the last three Global Dairy Trades have increased.
With exports not expected to improve much prior to the second half of 2016, the level of milk prices will depend heavily upon domestic sales and the level of milk production. Milk production is declining seasonally, but above a year ago and at levels to build stocks. Once stocks of butter and cheese are built to levels for the holidays by October or early November, butter and cheese prices will likely weaken.
The milk price outlook for the reminder of the year and into 2016 is not for higher prices.
 
Source: DairyHerd
 

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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