WASDE Report Reflects Enormous Production Push by U.S. Dairies

June 12, 2012 09:36 AM

June’s milk output estimate shows largest year-over-year increase since 1999.

Kees de Jong 10 10 020   CoIt came as no surprise that USDA increased its 2012 U.S. milk production forecast in today’s World Agricultural Supply and Demand Estimates (WASDE), but a year-over-year comparison underscores just how busy the nation’s milking machines have been over the past several months.
Today’s estimate forecasts U.S. milk output this year at 202.2 billion pounds, a 6-billion-pound jump over 2011’s 196.2 billion-pound production.
“The last time we saw a 6-bilion-pound year-over-year increase was in 1999, when it reached 6.2 billion pounds,” says dairy analyst Robin Schmahl of AgDairy LLC in Wisconsin.
Even with the tight milk-to-feed ratio of just 1.32, dairy farmers want to produce milk, Schmahl added.  The ratio measures dairies’ profitability.
“The lowest-ever milk-to-feed ratio was in 2009, when it was 1.45,” Schmahl said. “It’s usually been said that when the ratio is below 3.0, expansion slows or stops. We’ve been below that number for quite a while.”
Milk production is not likely to decline much in the near-future, especially with futures prices rallying more than $2 per cwt. over the past month, Schmahl said. In fact, USDA pegged 2013 U.S. milk production at 202.6 billion pounds, a 400-million-pound increase over 2012.
If this summer sees warmer-than-normal weather, however, milk output could fall off as cow numbers decline.
USDA slightly lowered its estimate for the 2012 All-milk price to $16.85-$17.25 per cwt. The reduction in the price estimate reflected weaker whey prices that more than offset slightly higher cheese prices.
For 2013, USDA left the All-Milk price unchanged from last month’s estimate, at $17.25-$18.25 per cwt.
U.S. dairy exports are also projected to increase on expected strength in cheese and nonfat dry milk sales. The WASDE report lifted 2012 exports to 8.9 billion pounds, up 400 million pounds from last month’s estimate.
The WASDE report left U.S. feed grain supplies for 2012/13 virtually unchanged. Projected 2012/13 season average price ranges for corn, sorghum, barley, and oats were all unchanged.
The report had a neutral effect on the grain market, Schmahl said.
“Unless we see a continued dry weather pattern corn and soybean prices may trend lower,” he added. “That would translate into continuing strong milk production.”

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