2016 U.S. Milk Production Projections Decline for Second Consecutive…
According to the August USDA World Agricultural Supply and Demand Estimate (WASDE) report, 2015 projected U.S. milk production was unchanged from last month, at 208.8 billion lbs. 2015 projected production equates to a 1.4% YOY increase from 2014 production of 206.0 billion lbs. The projected YOY increase in milk production would remain less than the three year average growth rate of 1.6%. 2016 projected U.S. milk production was revised lower due to weaker than expected milk prices, declining by 0.6 billion lbs to a total of 213.0 billion lbs. 2016 projected milk production translates to a 2.0% increase from the 2015 projected production of 208.8 billion lbs.
Export forecasts were reduced as competition in global markets is expected to be strong in both 2015 and 2016 while strong domestic demand will likely encourage increased imports. Product stocks at the end of 2015 were forecasted higher as a result of reduced exports and increased imports.
Large domestic supplies as a result of reduced exports and increased imports are expected to pressure dairy product prices downward throughout the duration of 2015. Price forecasts for butter, cheese, NFDM and whey were lowered from last month, resulting in the 2015 Class III price estimate being lowered $0.30-$0.40/cwt to $15.85-$16.05/cwt and the 2015 Class IV price estimate being lowered $0.70-$0.80/cwt to $13.00-$13.30/cwt. The 2016 Class III price forecast of $15.45-$16.45/cwt was reduced by $0.45/cwt on lower cheese and whey prices, resulting in a flat YOY change with the 2015 forecasted price at the midpoint. The 2016 Class IV price forecast of $13.50-$14.60/cwt was reduced by $0.95/cwt on lower NFDM prices but remains 6.8% above the 2015 forecasted level.
As shown in the chart below, the 2015 All-Milk price is expected to be well below previous year price levels, at a range of $16.75-$16.95/cwt, down $0.30-$0.40/cwt from the previous month and 29.7% below the 2014 average All-Milk price of $23.98/cwt. The 2016 All-Milk price forecast of $16.40-$17.40/cwt was reduced by $0.60/cwt, remaining below 2015 forecasted prices on the low end of the forecast for the second consecutive month.
Export forecasts were reduced as competition in global markets is expected to be strong in both 2015 and 2016 while strong domestic demand will likely encourage increased imports. Product stocks at the end of 2015 were forecasted higher as a result of reduced exports and increased imports.
Large domestic supplies as a result of reduced exports and increased imports are expected to pressure dairy product prices downward throughout the duration of 2015. Price forecasts for butter, cheese, NFDM and whey were lowered from last month, resulting in the 2015 Class III price estimate being lowered $0.30-$0.40/cwt to $15.85-$16.05/cwt and the 2015 Class IV price estimate being lowered $0.70-$0.80/cwt to $13.00-$13.30/cwt. The 2016 Class III price forecast of $15.45-$16.45/cwt was reduced by $0.45/cwt on lower cheese and whey prices, resulting in a flat YOY change with the 2015 forecasted price at the midpoint. The 2016 Class IV price forecast of $13.50-$14.60/cwt was reduced by $0.95/cwt on lower NFDM prices but remains 6.8% above the 2015 forecasted level.
As shown in the chart below, the 2015 All-Milk price is expected to be well below previous year price levels, at a range of $16.75-$16.95/cwt, down $0.30-$0.40/cwt from the previous month and 29.7% below the 2014 average All-Milk price of $23.98/cwt. The 2016 All-Milk price forecast of $16.40-$17.40/cwt was reduced by $0.60/cwt, remaining below 2015 forecasted prices on the low end of the forecast for the second consecutive month.