Volatility
June 11, 2019

WASDE Confirms Analyst Expectations: Higher Milk Prices Ahead

 |  By: Anna-Lisa Laca

In their Tuesday World Agriculture Supply and Demand Estimates (WASDE) report, USDA confirmed what analysts have been saying the past few months: higher milk prices are on the horizon.

 

According to the agency, milk production for 2019 is lowered from last month on slower-than-anticipated growth in milk per cow and lower expected cow numbers.

 

“The 2020 milk production forecast is reduced from last month as higher expected feed costs are expected to weaken producer margins, limiting growth in the dairy cow herd and milk per cow next year,” they said.

 

Fat basis imports are unchanged from the previous month and exports are reduced from the May estimate. USDA says the elimination of Mexican tariffs will only partially offset weakness in butterfat exports elsewhere.

 

The 2020 fat basis export forecast is unchanged, they said. Meanwhile, the skim-solids basis import forecast for 2019 is raised from last month on increased imports of milk protein products while the 2020 skim-solids basis import forecast is unchanged. The skim-solids basis export forecast for 2019 is reduced on current weakness in exports of nonfat dry milk (NDM), while exports of lactose are expected to be constrained by the additional tariffs imposed by China.

 

According to the agency, the 2019 cheese and whey price forecasts are reduced from the previous month while NDM and butter price forecasts are raised.

 

“For 2020, cheese and butter price forecasts are raised from the previous month, while NDM is unchanged. The whey price forecast is fractionally lower for 2020,” said.

 

USDA reduced the 2019 Class III price estimate on lower cheese and whey price forecasts and raised the Class IV price forecast on higher forecast butter and NDM prices. Class III and Class IV prices are raised in 2020.

 

The all milk price forecast is reduced to $18.00 per cwt for 2019 but is raised to $18.90 per cwt for 2020.

 

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