DairyBusiness Update for Jan. 11, 2013
USDA’s World Ag Supply & Demand Estimates (WASDE) report, released Jan. 11, raised both 2012 and 2013 milk production estimates slightly from a month earlier, based on a slower decline in cow numbers and stronger milk output per cow during the fourth quarter of 2012. USDA predicts slower cow removals will continue into 2013.
• 2012 production and marketings were projected at 200.0 billion lbs. and 199.0 billion lbs., respectively, both up 300 million lbs. from December’s projections. If realized, 2012 production and marketings would be up about 1.9% from 2011.
• 2013 milk production and marketings were raised 200 million lbs., to 199.9 billion lbs. and 198.9 billion lbs., respectively. If realized, 2013 totals would be virtually unchanged from 2012.
The 2012 all-milk price was estimated at $18.53/cwt., $1.61 less than 2011. Class III and Class IV prices averaged $17.44/cwt. and $16.01/cwt., respectively, down 93¢ and $3.03 compared to 2011 averages.
The 2013 projected all-milk price is in a wide range ($18.85-$19.65/cwt.), with a midpoint of $19.25/cwt., up 72¢ from 2012. Mid-range 2013 price projections for Class III and Class IV are $18.05/cwt. and $17.35/cwt., respectively.
On the cost side of the dairy equation, USDA’s World Ag Supply & Demand Estimates (WASDE) report left the 2012/13 estimated season-average corn price range (paid to farmers) unchanged from last month, in a range of $6.80-$8.00/bushel. The U.S. season-average soybean price was projected 5¢/bushel lower on both ends of the range, at $13.50-$15.50/bushel; and soybean meal prices were projected down $10/ton compared to last month’s forecast, at $430-$460/ton.
Impacting cull cow prices, USDA’s World Ag Supply & Demand Estimates (WASDE) report raised projected steer prices $1 on each end of the range, to $125-$134/cwt. If realized, the beef steer price would be $2-$12/cwt. higher than the 2012 average of just under $123/cwt.
USDA will release its Cattle report on Feb. 1, providing an indication of available dairy replacement heifers.
Two USDA reports released on Jan. 11 provide a glimpse of 2012 U.S. forage production and current stocks. In the case of alfalfa and alfalfa mixture hay, 2012 acreage and production were the lowest in six decades or more, as the drought and acreage competition from grain crops took a toll. The 2012 Crop Production Summary estimates acreage, yields and total production for hay and other forage crops, as well as corn silage. The January 2013 Crop Production report also estimates hay inventories as of Dec. 1, 2012.
• Alfalfa and alfalfa mixture dry hay production in 2012 was estimated at 52.0 million tons, down 6% from the Oct. 1 forecast and down 20% from 2011. This was the lowest U.S. production level since 1953. Harvested area, at 17.3 million acres, was 8% less than the Oct. 1 forecast and 10% less than 2011. This was the smallest harvested area since 1948.
• Production of all other dry hay in 2012 totaled 67.8 million tons, up 2% from the Oct. 1 forecast and 3% more than 2011. This was the second lowest United States production since 1998. Harvested area, at 39.0 million acres, was up less than 1% from October and 7% from last year. Average yield was estimated at 1.74 tons per acre, up 0.03 ton from October, but down 0.07 ton from last year.
With lower total 2012 hay production, all hay stored on farms on Dec. 1, 2012 totaled 76.5 million tons, down 16% from a year ago, and the lowest Dec. 1 stocks level since 1957. Disappearance from May 1, 2012 - Dec. 1, 2012 totaled 64.7 million tons, compared with 62.7 million tons for the same period a year ago.
Compared with last year, hay stocks as a percent of production decreased throughout much of the western United States. Prolonged dryness coupled with hot temperatures stifled not only pasture and range growth, but growth of alfalfa fields. As a result, overall hay production was negatively impacted in many states. In addition, livestock producers were forced to feed their herds earlier than normal due to the diminished availability of native feedstuffs.
Elsewhere, the increase in on-farm stocks as a percent of production across much of the Northern Tier, resulted mostly from producers holding a larger portion of their 2011 hay crop in storage due to an unusually mild winter and earlier availability of spring pastures. Similarly, hay stock levels were higher than last year in many Atlantic Coast States.
Growers seeded 2.39 million acres of alfalfa and alfalfa mixtures during 2012, up 3% from 2011. This represents the first increase in seeded area since 2005; however, it was still the second smallest seeded area of alfalfa and alfalfa mixtures for the U.S.
Corn silage production in 2012 was estimated at 113 million tons in 2012, up 4% from 2011 and represents the highest production in the United States since 1982. The U.S. silage yield was estimated at 15.4 tons per acre, down 3.0 tons from 2011. Area harvested for silage was estimated at 7.38 million acres, up 24 percent from a year ago.
Sorghum silage production in 2012 was estimated at 4.14 million tons, up 80% from 2011. Area cut for silage was estimated at 363,000 acres, up 62% from the previous year. Silage yields averaged 11.4 tons per acre, up 1.1 tons per acre from 2011.
Corn and soybean markets continue to be filled with uncertainty due to the lasting effects of the lingering drought, but there is now a high level of certainty about the size of the crops that persevered against the long, dry summer of 2012, according to analysts at the American Farm Bureau Federation.
Those are just a few of the observations made by Todd Davis, AFBF senior economist following USDA’s release of four major reports on Friday – the World Agricultural Supply and Demand Estimates, Crop Production, Grain Stocks and Winter Wheat Seedings.
“This is like Super Bowl Sunday for the grain and oil seed markets,” Davis said. “This is the last word on 2012 production. It sets the table on the supply-side for the rest of the marketing year, and it gives farmers some insight as they finalize spring cropping plans.”
According to Davis, corn and soybean markets are at tight levels, characterized by higher prices that are both curbing demand and providing competing incentives for farmers to sort through for those two crops this year.
“The lingering drought is of concern to the markets, as average or above average yields are needed in 2013 to allow the market to rebuild stocks to levels that will remove some of the uncertainty in the market,” Davis said.
USDA reports released on Jan. 11:
Corn stored in all positions on Dec. 1, 2012 totaled 8.03 billion bushels, down 17% from a year earlier. Of the total stocks, 4.59 billion bushels were stored on farms, down 26% from a year earlier. Off-farm stocks, at 3.44 billion bushels, were down 1% from a year ago.
The September-November 2012 indicated disappearance is 3.74 billion bushels, compared with 3.84 billion bushels during the same period last year.
Soybeans stored in all positions on Dec. 1, 2012 totaled 1.97 billion bushels, also down 17% from a year earlier. Soybean stocks stored on farms totaled 910 million bushels, down 20% from a year ago. Off-farm stocks, at 1.06 billion bushels, were down 14% from last December. Indicated disappearance for September-November 2012 totaled a record high 1.22 billion bushels, up 30% from the same period a year earlier.
MARKETS: Barrels lower; Class III futures mixed
Today's market closing prices:
Butter: up 0.75¢, to $1.4550/lb.
Cheddar blocks: unchanged at $1.72/lb.
Cheddar barrels: down 1.25¢, to $1.6725/lb.
Grade A nonfat dry milk: unchanged at $1.5350/lb.
Extra Grade nonfat dry milk: unchanged at $1.56/lb.
Class III milk: -21¢ to +2¢ through November 2013. Based on current CME closing prices, the 2012 average is $17.44/cwt.; the 2013 average is $18.22/cwt.; and the 2014 average is $16.35/cwt.
Corn futures mixed; soybeans, meal lower
Corn: up near-term, lower after September 2013. The 2013 average is $6.59/bu.
Soybeans: -6¢ to -18¢, March 2013 through September 2014. The 2013 average is $13.45/bu.
Soybean meal: -$1.10 to -$5.60/ton through September 2014. The 2013 average is $384.73/ton.
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