USDA’s 2014 Dairy Outlook Foresees Bullish Scenario

February 24, 2014 04:37 AM
USDA’s 2014 Dairy Outlook Foresees Bullish Scenario

Agricultural economist Uthra Raghunathan says international demand will remain a major factor for the U.S. dairy market this year.

The dairy market can expect higher milk output, lower feed prices, robust international demand and strong milk prices in the coming year, projects Uthra Raghunathan, agricultural economist with USDA’s Agricultural Marketing Service.

Speaking Feb. 21 at USDA’s Agricultural Outlook Forum in Arlington, Va., Raghunathan said strong product prices have been seen in early 2014, with the CME showing record prices for cheese blocks and barrels. Prices are projected to remain strong in first quarter of 2014, but are likely to slowly decline later in the year as Oceania and European Union production puts pressure on U.S. exports.

Most 2014 average prices are projected to be higher than 2013 average prices, she said. She forecast these levels:
• Butter price between $1.550 and $1.650 per lb.;
• Nonfat dry milk price between $1.785 and $1.845 per lb.;
• Cheese price between $1.815 and $1.885 per lb.;
• Whey price between $0.56 and $0.59 per lb.;
• Class III price between $18.53 and $19.05 per cwt.;
• Class IV price between $19.80 and $20.60 per cwt.;
• All-Milk price between $20.85 and $21.55 per cwt.

U.S. milk production is projected to grow between 1.65% to 2.45% year over year, she noted. Cow numbers will likely increase in 2016 and 2017 and then decrease from 2018 until 2023. Output per cow is forecast to rise from 2015 to 2023 at a moderate rate of about 2% per year.

Favorable milk prices and feed cost indicate an expansionary period. Corn prices are projected at $4.20 - $4.80 per bu. for the 2013/2014 year. Further declines are expected for the 2014/2015 crop year. Raghunathan estimated soybean meal prices at $425 - $465 per ton for the 2013/2014 year. Further declines are projected for the 2014/2015 crop year. She noted that actual alfalfa prices so far are 15% lower than last year.

International demand will remain a major factor for U.S. markets in 2014, Raghunathan said. In 2013, U.S. exports set a new record. "During the last few years, the world dairy market has seen exceptional demand from China and other countries," she noted. "With international demand outstripping supplies of the traditional exporting countries, the United States has become an important supplier to the world market."

With both global populations and national incomes also projected to increase, international dairy demand is projected to grow as well.

"The U.S. is well positioned to play a major role in supplying international markets, but expected increases in production by competing exporters are expected to intensify competition in the coming year," added Raghunathan.

As the year progresses, the European Union and Oceania will play a large part in the decrease of US exports as their production increases relative to the prior weather-affected year.

Read Raghunathan’s report here

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