US Dairy Outlook

The Livestock, Dairy, and Poultry Outlook is a monthly report published by the Economic Research Service of USDA that provides supply and use projections for the U.S dairy market. A summary of the November 2018 issue is provided below with the full report available at:

According to the National Agricultural Statistics Service (NASS) Milk Production report, U.S. milk production in September 2018 totaled 17.376 billion pounds, 1.3 percent above September 2017. NASS made significant revisions to milk cow numbers, with downward revisions of 2,000, 17,000, and 21,000 head for June, July, and August, respectively. NASS estimates that cow numbers fell to an average of 9.367 million head in September, 12,000 less than August and 32,000 less than September 2017. Milk per cow in September was 1,855 pounds, 30 pounds higher than September 2017. A smaller milking herd in late 2018 is expected to persist into 2019; therefore, the milk cow forecast has been lowered to 9.375 million head. With increased culling of the herd however, higher milking efficiency is expected, motivating an increase in the milk per cow forecast to 23,565 pounds. With these changes, the overall milk production forecast for 2019 is now 220.9 billion pounds.

In September 2018, dairy exports declined from August but were up compared to September 2017. On a milk-fat milk-equivalent basis, September exports were 848 million pounds, 68 million less than August but 151 million more than September 2017. September exports on a skim-solids milk-equivalent basis were 3.446 billion pounds, 495 million less than August but 360 million more than September 2017. Exports declined from August to September for most dairy products, including nonfat dry milk/skim milk powder (NDM/SMP), butterfat products (butter, anhydrous milkfat, and dairy spreads), cheese, whey products, and lactose. High tariffs imposed by Mexico on cheese and by China on a wide variety of dairy products continue to limit exports to those countries.

In September 2018, imports on a milk-fat basis were 549 million pounds, 38 million less than August but 113 million more than September 2017. On a skim-solids basis, September imports were 355 million pounds, 47 million less than August and 26 million less than September 2017. Notably, imports of milk protein products (casein and milk protein concentrate), whole milk powder, and various food preparations containing milk solids fell from August to September.

Year-over-year growth in domestic commercial use in the third quarter of 2018 was modest. On a milk-fat basis, it was 54.7 billion pounds, 1.1 percent higher than the third quarter of 2017. On a skim-solids basis, third-quarter domestic commercial use was 45.1 billion pounds, 1.6 percent higher than the third quarter of 2017. Notably, while overall third-quarter domestic uses of most major products were above the third quarter of 2017, domestic uses of NDM/SMP and dry whey were down by 20.0 percent and 11.7 percent, respectively.

Current weakness in cheese prices is expected to carry into 2019 but should begin to abate in the second half of the year; as a result, the cheddar cheese price is forecast to range $1.560-$1.650 per pound. With lower butter prices expected to continue next year, the butter price forecast is $2.200-$2.320 per pound for the year. The dry whey price and NDM price forecasts for 2019 are $0.390-$0.420 and $0.830-$0.900 per pound, respectively.

With lower projected cheese prices, the Class III price forecast is $15.15-$16.05 per cwt. The Class IV price forecast for the year is $14.35-$15.35 per cwt. With the lower Class III price forecast, the all-milk price for 2019 is forecast at $16.70-$17.60 per cwt.