June 10, 2016

WASDE Report Supports Improving Milk Prices

 |  By: Anna-Lisa Laca

For the past week some analysts have been looking for milk prices to start climbing out of the gutter. USDA supports the notion that they will. In Thursday’s World Agriculture Stock Estimate (WASDE) report USDA increased the forecast all milk price range for 2016 from $14.95 to $15.35, up 25 to 35 cents from May.

According to the report, Class III and Class IV price forecasts are raised for 2016 on component product prices.  For 2017, the all milk price is unchanged at $15.25 to $16.25 per cwt and the Class III price is lowered on lower cheese prices.

Milk Production Forecasts Raised

Bad news for bulls, USDA also increase its milk production forecast for 2016 and 2017 reporting “cow numbers indicate the herd continues to expand.” They did not change their estimated output per cow.

Dairy Stocks Remain High

Thursday’s report also lowered the fat and skim -solids basis export forecasts for 2016 and 2017. USDA says international supplies of dairy products remain abundant and U.S. prices remain high relative to those of competitors.  Fat and skim-solids basis stocks are forecast higher as stocks of butter and cheese are expected to remain relatively high.  According to the report, fat basis imports are reduced for both 2016 and 2017 on expectations of slower imports of butterfat products, and to a lesser extent, cheese.

Cheese and Butter Higher Despite Stocks

According to USDA, cheese and butter prices for 2016 are forecast higher despite large stocks because of the limited import expectation. However, come 2017, cheese prices could take a dip as high stocks continue to pressure the market, USDA says.