"I’m telling my clients that $3 corn is possible," says AgDairy's Robin Schmahl.
Milk prices, dairy exports expected to remain strong, while a large projected corn carryover in 2014 could constrict feed prices.
U.S. milk production for 2014 will reach a record high as lower feed costs and relatively strong milk prices support higher output on the nation’s dairy farms, according to the World Agricultural Supply and Demand Estimates (WASDE) report released today by USDA.
U.S. dairies are projected to produce a record 204.6 billion pounds of milk next year, the WASDE report noted. That’s up from the 201.8 billion pounds expected for this year. The 2014 estimate is also sharply higher than 2012’s 200.3 billion-pound milk production, and 2011’s 196.2 billion-pound output.
A significant highlight of today’s WASDE report is the projected U.S. corn ending-stock level of 2 billion bushels at the end of the 2014 season. That’s 1.2 billion bushels more than seen for 2012-13.
"If we see that big of a carryout in corn, we could see pretty low corn prices," says Robin Schmahl, a commodity broker with AgDairy LLC. "I’m telling my clients that $3 corn is possible."
Even so, Schmahl doesn’t believe ending stocks will reach the 2 billion-bushel level. This season's production could be limited since the corn crop has already faced challenges. "Weather has been less than optimal, and we’re seeing late planting in the Upper Midwest," he says.
Schmahl says the U.S. saw bigger corn ending stocks in the 1980s. For the 1987-88 season, the U.S. corn carryover reached 4.2 billion bushels.
Corn's season-average farm price at $4.30 to $5.10 per bu. is down sharply from the record $6.70 to $7.10 for 2012-13, USDA said in today’s report.
Commercial dairy exports for 2014 are forecast higher at 10.3 billion pounds as abundant U.S. supplies and competitive prices are expected to spur foreign demand. WASDE’s 2014 export estimate compares to exports of 10.0 billion pounds expected for 2013. Both years are up sharply from 2012’s 8.8 billion pounds of dairy exports, and 2011’s 9.4 billion.
USDA notes that imports will decrease on greater domestic supplies.
With higher domestic production, USDA also forecasts lower prices for cheese, butter and whey. Nonfat dry milk (NDM), however, is higher largely on continued strength in international demand. Both Class III and Class IV prices for 2014 are forecast lower than 2013’s expected levels. USDA projects 2013 Class III prices at $17.80-$18.30, and 2014 levels at $17.00-$18.00.
In the case of Class IV, lower forecast butter prices more than offset higher NDM prices. USDA forecasts the 2014 All-Milk price at $18.85-$19.85 per cwt. It estimates the 2013 All-Milk price at $19.50-$20.00 per cwt.