Tighter Stocks, Strong Demand Driving Run-Up in Dairy Prices
Published: Friday, May 20, 2022
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The Agriculture Department raised its 2022 milk production estimate for the second month in a row in its World Agricultural Supply and Demand Estimates report (WASDE), citing higher milk cow inventories more than offsetting slower growth in milk per cow. It also gave us our first view of 2023 projections.
2022 production and marketings were estimated at 226.7 and 225.6 billion pounds respectively, up 400 million pounds on production and 300 million on marketings. If realized output would be up 400 million pounds, or .2 percent, from 2021.
2023 production and marketings were estimated at 229.5 and 228.4 billion pounds respectively. If realized, 2023 production would be up 2.8 billion pounds or 1.2 percent, from 2022. The increase will be driven by gains in milk per cow, says the WASDE, with the milk cow herd expected to average close to 2022 levels.
Price forecasts for 2022 cheese and butter were raised from the previous month, based on tighter stocks and firm demand. Non-fat dry milk prices were raised fractionally while whey prices were lowered, as U.S. prices are expected to become competitive with international prices.
The 2022 cheese price average was projected at $2.1750 per pound, up 2.50 cents from last month's estimate, and compares to the 2021 average of $1.6755. The 2023 average was estimated at $2.04 per pound.
Butter was projected at $2.65 per pound for 2022, up a penny from a month ago, and compares to $1.7325 in 2021. The 2023 average was estimated at $2.35.
Nonfat dry milk is projected to average $1.7150 per pound for 2022 and $1.58 for 2023. Dry whey was projected to average 65.50 cents per pound in 2022 and 52 cents per pound in 2023.
The 2022 Class III milk price average is projected at $22.75 per hundredweight, unchanged from a month ago, compares to $17.08 in 2021, and was estimated to average $20.50 in 2023.
The Class IV is expected to average $23.80 in 2022, down 25 cents from a month ago, and compares to $16.09 in 2021. The 2023 average is at $21.40.
The U.S. corn outlook is for lower production, domestic use, exports, ending stocks, and higher prices. The corn crop is projected at 14.5 billion bushels, down 4.3 percent from last year. The yield is projected at 177 bushels per acre, 4 bushels below the weather adjusted trend presented at USDA's Agricultural Outlook Forum in February. "The very slow start to this year's planting in the major corn producing states and the likelihood that progress by mid-May will remain well behind normal will reduce yield prospects," the WASDE stated.
Beginning stocks are up relative to a year ago but total corn supplies are forecast to decline 2.7 percent, to 15.9 billion bushels. Total corn use was forecast to fall 2.5 percent on declines in domestic use and exports. Food, seed and industrial use is virtually unchanged at 6.8 billion bushels. Corn used for ethanol was unchanged relative to a year ago on expectations of flat motor gasoline consumption.
Corn feed and residual use is down 4.9 percent from a year ago, reflecting a smaller crop, higher expected season-average farm prices received by producers, and a decline in grain consuming animals. Corn exports are forecast to decline 4 percent "as lower supplies and robust domestic demand limit prospects," said the WASDE.
The soybean outlook is for higher supplies, crush, exports, and ending stocks. The soybean crop is projected to hit a record 4.64 billion bushels, up 5 percent from last year's crop, mainly on higher harvested area. Soybean supplies are projected at 4.89 billion bushels, up 4 percent. Total oilseed production was projected at 136.6 million tons, up 6.1 million from a year ago, mainly on higher soybean production. Domestic soybean meal disappearance is forecast to increase 2 percent with low soybean meal prices relative to corn, according to the WASDE.
Soybean meal exports are forecast at 14.4 million short tons, leaving the U.S share of global trade near the prior 5-year average. Soybean exports are forecast at 2.2 billion bushels, up 60 million from the revised 2021-22 projection.
The season-average soybean price is forecast at $14.40 per bushel compared with $13.25 last season. Soybean meal prices are forecast down $20 per short ton, to $400, and soybean oil prices are forecast down 5 cents to average 70 cents per pound, as oilseed and product supplies rebound in foreign markets.
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