Sunday, March 21, 2010

Too Many Cows?

Every month, the USDA issues a new Livestock, Dairy, and Poultry Outlook Report.  They can be viewed at this link.  For the last 6 months, the outlook for the projected number of cows has steadly increased.  The timing has also changed, with the lows now forecast later in 2010.  Do we need more cows for a longer period of time?

Below are the forecast by the date they were issued.  The most recent Outlook Report, March, 2010, is the orange line at the top of the chart.

In the last two months, the predicted number of cows has increased 45,000 head and is now expected to  reach a minimum of 9,000,000 by the end of 2010 vs. 8,955,000 in January's outlook. 

In October, 2009, the forecast was for 8,945,000 cows by the end of the 3rd quarter, 2010.  The most recent forecast now predicts 9,040,000 by the end of the 3rd quarter.  This is an increase of 95,000 cows over the forecast made 5 months ago.

Will 2010 be a good year for Dairy Producers?   It looks "less good" by the month as the number of cows refuses to decrease to expectations.  Are there too many heifers?

Exchange rates are no longer helping exports (more on this in a future post to this blog).  Frankly, there is little reason to expect much improvement for the rest of 2010.

Saturday, March 6, 2010

February Component Prices Down from January

February, 2010 Class III milk and component prices were announced on March 5.  Butterfat and protein prices were slightly down.  Protein, the most financially significant important component, was down the most.

Cheese prices continued to fall in February as the U.S. dollar strengthened.  Imports and exports of cheese have not been announced for 2010, but with the shift in exchange rates, we can expect a decrease in exports and an increase in imports.   As analyzed in previous posts, exchange rates play heavily in the cheese supply/demand parameters and the supply/demand for U.S. cheese heavily influences protein and Class III milk prices.

The table below shows the data for the majority of dairy pricing parameters.  The table starts with the 2009 low of $9.84/cwt in May, 2009.  The only component that has moved steadily upward is Dry Whey, which has a very small impact on milk prices.  See the April 7, 2009 post to this blog.

Throughout the ups and downs of the 2009/10 pricing fluctuations, protein has remained the biggest piece of the milkcheck payment.  Protein currently makes up 57% of the Class III milk price.

Below is the graph of U.S. American Cheese inventory.  The growth appears to be huge and probably is.  Some of the increase is resulting from expanded reporting.  In a future post to this blog, the increase in it's components of real growth and new reporting will be analyzed.  The increase could have a significant impact on the recovery of cheese prices and thereby, milk prices.