US dairy production seen to rise in 2014

Publish time: 19th March, 2014      Source:
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March 19, 2014


US dairy production seen to rise in 2014


Before dipping back to US$19.00/hundredweight (cwt) in 2015, US dairy producers will see the all-milk price peak well above US$20.00/cwt in 2014, according to the US Baseline Briefing Book released by the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri.



Prices will then settle in a range of US$17.50-US$18.25/cwt through 2023.



FAPRI''s projections were prepared based on market information available in January of 2014, and incorporates many provisions of the 2014 Farm Bill, including the Dairy Margin Protection Programme.



The Class III price is projected to average US$17.87/cwt this year, declining to US$15.24/cwt by 2023, while the Class IV price is projected to average US$19.49/cwt in 2014, and then averaging under US$16.00/cwt through 2023.



Combined with declining feed costs, profit margins for most dairy producers will be strong in 2014. Margins will average US$9.82/cwt in 2014; US$9.72/cwt in 2015; and US$9.40/cwt in 2016. Thereafter, margins dip below US$9.00/cwt in 2018, but remain above US$8.50/cwt for the duration of the period.



Those margins encourage milk production, FAPRI said. Milk production is projected to increase to 206.1 billion pounds in 2014, up 4.9 billion pounds from 2013. By 2023, US milk production is projected to reach 235 billion pounds.



The FAPRI report projects dairy cow numbers for the Top 10 dairy states, as well as total US numbers. California''s dairy herd is projected to grow from 1.782 million head this year to 1.797 million head by 2016, before slowly declining to 1.78 million head by 2023. Wisconsin''s dairy herd is projected to grow steadily, from 1.28 million head in 2014 to 1.343 million head in 2023.



International dairy product prices are near record highs at the beginning of 2014, and the US will export large quantities of milk powders into world markets at these price levels, FAPRI said. Cheese and butter exports benefit to a lesser extent. The strong international market prices are due in part to supply factors in major exporting nations, which are likely temporary. However, strong demand, particularly for milk powder in China, may be a longer lasting market phenomenon.



Cheese and non-fat dry milk prices are expected to average near US$1.80/pound this year. Cheese prices (40-pound cheddar blocks at the CME cash market) are then projected to slowly decline to US$1.58/pound by 2012, while non-fat dry milk prices are projected to drop to US$1.55 per pound next year and then average between US$1.40 and US$1.48/pound from 2016 through 2023. Butter prices are projected to average US$1.48/pound in 2014 and 2015 and then fall to US$1.25/pound by 2023.